Tests of time-invariance

Fabio Busetti and Andrew Harvey

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Quantiles provide a comprehensive description of the properties of a variable and tracking changes in quantiles over time using signal extraction methods can be informative. It is shown here how stationarity tests can be generalized to test the null hypothesis that a particular quantile is constant over time by using weighted indicators. Corresponding tests based on expectiles are also proposed; these might be expected to be more powerful for distributions that are not heavy-tailed. Tests for changing dispersion and asymmetry may be based on contrasts between particular quantiles or expectiles. We report Monte Carlo experiments investigating the e¤ectiveness of the proposed tests and then move on to consider how to test for relative time invariance, based on residuals from fitting a time-varying level or trend. Empirical examples, using stock returns and U.S. inflation, provide an indication of the practical importance of the tests.

Keywords: Dispersion; expectiles; quantiles; skewness; stationarity tests; stochastic volatility, value at risk. (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Pages: 29
Date: 2007-03
New Economics Papers: this item is included in nep-ecm and nep-ets
Note: Ec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Tests of time-invariance (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0657

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