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Weighted Average Power Similar Tests for Structural Change for the Gaussian Linear Regression Model

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  • Giovanni Forchini

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Abstract

The average exponential tests for structural change of Andrews and Ploberger (Econometrica, 62, 1994) and Andrews, Lee and Ploberger (Journal of Econometrics 70, 1996) and modifications thereof maximize a weighted average power which incorporates specific weighting functions in order to make the resulting test statistics simple. Generalizations of these tests involve the numerical evaluation of (potentially) complicated integrals. In this paper we suggest a uniform Laplace approximation to evaluate weighted average power test statistics for which a simple closed form does not exist. We also show that a modification of the avg-F test is optimal under a very large class of weighting functions and can be written as a ratio of quadratic forms. Finally, we discuss how the computational burden of averaging over all possible change-points can be addressed.

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File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2005/wp20-05.pdf
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Bibliographic Info

Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 20/05.

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Length: 21 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:msh:ebswps:2005-20

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Related research

Keywords: Linear Regression Model; Similar Tests; Invariant Tests; Structural Change; Weighted Average Power Tests; Laplace Approximation; Uniform Laplace Approximation.;

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  1. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
  2. Hillier, Grant H., 1987. "Classes of Similar Regions and Their Power Properties for Some Econometric Testing Problems," Econometric Theory, Cambridge University Press, vol. 3(01), pages 1-44, February.
  3. Andrews, Donald W. K. & Lee, Inpyo & Ploberger, Werner, 1996. "Optimal changepoint tests for normal linear regression," Journal of Econometrics, Elsevier, vol. 70(1), pages 9-38, January.
  4. Forchini, G., 2002. "Optimal Similar Tests For Structural Change For The Linear Regression Model," Econometric Theory, Cambridge University Press, vol. 18(04), pages 853-867, August.
  5. Marine Carrasco, 2004. "Chi-square Tests for Parameter Stability," RCER Working Papers 508, University of Rochester - Center for Economic Research (RCER).
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