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An Asymptotically F-Distributed Chow Test in the Presence of Heteroscedasticity and Autocorrelation

Yixiao Sun () and Xuexin Wang

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Abstract: This study proposes a simple, trustworthy Chow test in the presence of heteroscedasticity and autocorrelation. The test is based on a series heteroscedasticity and autocorrelation robust variance estimator with judiciously crafted basis functions. Like the Chow test in a classical normal linear regression, the proposed test employs the standard F distribution as the reference distribution, which is justified under fixed-smoothing asymptotics. Monte Carlo simulations show that the null rejection probability of the asymptotic F test is closer to the nominal level than that of the chi-square test.

Date: 2019-11
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Handle: RePEc:arx:papers:1911.03771