Monotonic Power in tests for structural change in the mean based on orthonormal series filtering

Elena Andreou

No 394, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: The paper proposes a method that solves the non-monotonic power problem of a family of structural changes in mean tests based on an orthonormal series filtering of the error process before estimating variance of the test statistics. This method yields a consistent estimator for the variance under the null and various parameter change alternatives, retains the asymptotic distribution of these change-point statistics and restores their monotonic power while retaining good size properties.

Keywords: structural break test; heteroskedastic and autocorrelation consistent estimator; orthonormal series (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Date: 2006-07-04
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Persistent link: https://EconPapers.repec.org/RePEc:sce:scecfa:394

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