ASYMPTOTIC BEHAVIOR OF THE CUSUM OF SQUARES TEST UNDER STOCHASTIC AND DETERMINISTIC TIME TRENDS

Bent Nielsen and Jouni S. Sohkanen

Econometric Theory, 2011, vol. 27, issue 4, 913-927

Abstract: We generalize the cumulative sum of squares (CUSQ) test to the case of nonstationary autoregressive distributed lag models with deterministic time trends. The test may be implemented with either ordinary least squares residuals or standardized forecast errors. In explosive cases the asymptotic theory applies more generally for the least squares residuals-based test. Preliminary simulations of the tests suggest a very modest difference between the tests and a very modest variation with nuisance parameters. This supports the use of the tests in explorative analysis.

Date: 2011
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Working Paper: Asymptotic behaviour of the CUSUM of squares test under stochastic and deterministic time trends (2009)
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