A CUSUMSQ test for structural breaks in error variance for a long memory heterogeneous autoregressive model

Eunju Hwang and Dong Wan Shin

Statistics & Probability Letters, 2015, vol. 99, issue C, 167-176

Abstract: For testing error variance instability, a test based on CUSUM squares of the residuals in HAR model is constructed and its limiting null distribution is derived to be a simple function of the standard Brownian bridge. A finite sample Monte-Carlo experiment shows reasonable size and power performances of the proposed test. The test is applied to the log-return realized volatilities of some stock price index and exchange rate to find evidence for variance instability after adjusting long-memories.

Keywords: HAR model; Long-memory; Parameter constancy; Realized volatility; Structural break (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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DOI: 10.1016/j.spl.2015.01.013

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