Multiple hypothesis test for parameter constancy based on recursive residuals |
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Authors: | Chia-Shang James Chu |
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Institution: | Department of Economics MC0253 , University of Southern California , Los Angeles, CA, 90089 E-mail: cchu@almaak.usc.edu |
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Abstract: | This article presents a multiple hypothesis test procedure that combines two well known tests for structural change in the linear regression model, the CUSUM test and the recursive t test. The CUSUM test is run through the sequence of recursive residuals as usual; if the CUSUM plot does not violate the critical lines, one more step is taken to perform the t test for hypothesis of zero mean based on all recursive residuals. The asymptotic size of this multiple hypothesis test is derived; power simulation results suggest that it outperforms the traditional CUSUM test and complements other tests that are currently stressed in econometrics. |
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Keywords: | CUSUM test multiple hypothesis testing structural change |
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