Modified tests for change points in variance in the possible presence of mean breaks |
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Authors: | Hao Jin Jinsuo Zhang Han Hao |
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Affiliation: | 1. Department of Mathematics, Xi An University of Science and Technology, Xi An, People's Republic of China;2. Department of Mathematics, University of North Texas, Denton, TX, USA;3. Department of Management, Yan An University, Yan An, People's Republic of China;4. Department of Mathematics, University of North Texas, Denton, TX, USA |
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Abstract: | This paper considers the detection problem of variance changes for the time series involving abrupt and/or smooth breaks in mean. Often, in these situations, the tests of choice are based on cumulative sum of squares statistics. We show that the test statistics are not robust in the presence of broken mean and their sizes suffer severe distortions. The adjusted residual-based method is then proposed to eliminate these deficiencies and makes a significant improvement. Finally, simulation results confirm the validity of these modified test statistics, and an empirical data analysis using some stock price series from the Shanghai Stock Exchange is reported. |
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Keywords: | Hypothesis testing variance changes mean breaks CUSSQ test |
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