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wrong estimation of the true number of shifts in structural break models: Theoretical and numerical evidence

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Author Info

  • Jamel JOUINI

    ()
    (GREQAM, Université de la Méditerranée, France and FSEGN, ESSAIT and LEGI, Université 7 Novembre de Carthage, Tunisie)

  • Mohamed BOUTAHAR

    ()
    (GREQAM and Faculté des Sciences, Université de la Méditerranée, France)

Abstract

The aim of the paper is to consider the problem of selecting the number of breaks in the mean of a time series. Indeed, we prove analytically and show by a Monte Carlo study that some model selection criteria will tend to choose a spuriously high number of structural breaks when the process is trend-stationary without changes. The important question suggested by our results is that of distinction between trend-stationary process and random walk when modelling real data series.

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File URL: http://www.accessecon.com/pubs/EB/2007/Volume3/EB-06C20004A.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2007)
Issue (Month): 3 ()
Pages: 1-10

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Handle: RePEc:ebl:ecbull:eb-06c20004

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Keywords: Model selection;

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References

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  1. Bai, Jushan, 1998. "A Note On Spurious Break," Econometric Theory, Cambridge University Press, vol. 14(05), pages 663-669, October.
  2. Perron, Pierre, 1997. "L’estimation de modèles avec changements structurels multiples," L'Actualité Economique, Société Canadienne de Science Economique, vol. 73(1), pages 457-505, mars-juin.
  3. Nunes, Luis C. & Newbold, Paul & Chung-Ming Kuan, 1996. "Spurious number of breaks," Economics Letters, Elsevier, vol. 50(2), pages 175-178, February.
  4. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  5. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
  6. Jouini, Jamel & Boutahar, Mohamed, 2005. "Evidence on structural changes in U.S. time series," Economic Modelling, Elsevier, vol. 22(3), pages 391-422, May.
  7. Yao, Yi-Ching, 1988. "Estimating the number of change-points via Schwarz' criterion," Statistics & Probability Letters, Elsevier, vol. 6(3), pages 181-189, February.
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Cited by:
  1. Mohamed Boutahar & Jamel Jouini, 2007. "A Methodology For Detecting Breaks In The Mean And Covariance Structure Of Time Series," Working Papers halshs-00354249, HAL.
  2. Jamel JOUINI & Mohamed BOUTAHAR, 2007. "Spuriousness of information criteria when selecting the number of breaks in stationary AR(p) process," Economics Bulletin, AccessEcon, vol. 3(38), pages 1-11.

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