Optimal Predictive Tests and a Simulation Study

Alain Guay

No 142, Cahiers de recherche CREFE / CREFE Working Papers from CREFE, Université du Québec à Montréal

Abstract: This paper shows that predictive tests for structural change with unknown breakpoint are optimal tests such as defined by Sowell (1996a, 1996b). Optimal predictive tests for parameter instability and overidentifying restrictions stability are proposed. An optimal predictive test for parameter instability of a subset of moment conditions with unknown breakpoint is also introduced. The finite sample properties of LM, Wald, LR-type and predictive tests for parameters instability are studied via a simulation study.

Dans cet article, nous montrons que les tests de type prédictif pour détecter des changements structurels sont des tests optimaux selon la définition de Sowell (1996a, 1996b). Des tests prédictifs optimaux sont proposés pour détecter l'instabilité des paramètres et des conditions de suridentification. Un test optimal de stabilité d'un sous-emsemble des conditions de moments est également introduit. Une étude de Monte-Carlo compare le comportement en petit échantillon des tests Wald LR, LM et prédictif.

Keywords: Generalized method of moments; structural stability testing; optimal tests (search for similar items in EconPapers)
JEL-codes: C1 C12 C22 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2001-10
New Economics Papers: this item is included in nep-ecm
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