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Heteroskedasticity-robust tests for structural change

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  • James G. MacKinnon

Abstract

It is remarkably easy to test for structural change, of the type that the classic F or "Chow" test is designed to detect, in a manner that is robust to heteroskedasticity of possibly unknown form. This paper first discusses how to test for structural change in nonlinear regression models by using a variant of the Gauss-Newton regression. It then shows how to make these tests robust to heteroskedasticity of unknown form and discusses several related procedures for doing so. Finally, it presents the results of a number of Monte Carlo experiments designed to see how well the new tests perform in finite samples.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_717.pdf
File Function: First version 1988
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Bibliographic Info

Paper provided by Queen's University, Department of Economics in its series Working Papers with number 717.

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Length: 15 pages
Date of creation: 1988
Date of revision:
Publication status: Published in Empirical Economics, 14, 1989
Handle: RePEc:qed:wpaper:717

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Keywords: Chow test; HCCME; heteroskedasticity; artificial regression; Gauss-Newton regression; GNR; structural break;

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References

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  1. Chesher, Andrew & Jewitt, Ian, 1987. "The Bias of a Heteroskedasticity Consistent Covariance Matrix Estimator," Econometrica, Econometric Society, vol. 55(5), pages 1217-22, September.
  2. Jayatissa, W A, 1977. "Tests of Equality between Sets of Coefficients in Two Linear Regressions when Disturbance Variances Are Unequal," Econometrica, Econometric Society, vol. 45(5), pages 1291-92, July.
  3. MacKinnon, James G. & White, Halbert, 1985. "Some heteroskedasticity-consistent covariance matrix estimators with improved finite sample properties," Journal of Econometrics, Elsevier, vol. 29(3), pages 305-325, September.
  4. Honda, Yuzo, 1982. "On Tests of Equality between Sets of Coefficients in Two Linear Regressions When Disturbance Variances Are Unequal," The Manchester School of Economic & Social Studies, University of Manchester, vol. 50(2), pages 116-25, June.
  5. Watt, P A, 1979. "Tests of Equality between Sets of Coefficients in Two Linear Regressions When Disturbance Variances Are Unequal: Some Small Sample Properties," The Manchester School of Economic & Social Studies, University of Manchester, vol. 47(4), pages 391-96, December.
  6. Engle, Robert F., 1982. "A general approach to lagrange multiplier model diagnostics," Journal of Econometrics, Elsevier, vol. 20(1), pages 83-104, October.
  7. Davidson, Russell & MacKinnon, James G, 1984. "Model Specification Tests Based on Artificial Linear Regressions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(2), pages 485-502, June.
  8. Weerahandi, Samaradasa, 1987. "Testing Regression Equality with Unequal Variances," Econometrica, Econometric Society, vol. 55(5), pages 1211-15, September.
  9. Russell Davidson & James G. MacKinnon, 1985. "Heteroskedasticity-Robust Tests in Regression Directions," Working Papers 616, Queen's University, Department of Economics.
  10. Schmidt, Peter & Sickles, Robin, 1977. "Some Further Evidence on the Use of the Chow Test under Heteroskedasticity," Econometrica, Econometric Society, vol. 45(5), pages 1293-98, July.
  11. Toyoda, Toshihisa, 1974. "Use of the Chow Test under Heteroscedasticity," Econometrica, Econometric Society, vol. 42(3), pages 601-08, May.
  12. Toyoda, Toshihisa & Ohtani, Kazuhiro, 1986. "Testing equality between sets of coefficients after a preliminary test for equality of disturbance variances in two linear regressions," Journal of Econometrics, Elsevier, vol. 31(1), pages 67-80, February.
  13. Ohtani, Kazuhiro & Toyoda, Toshihisa, 1985. "Small Sample Properties of Tests of Equality between Sets of Coefficients in Two Linear Regressions under Heteroscedasticity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 37-44, February.
  14. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  15. Phillips, G. D. A. & McCabe, B. P., 1983. "The independence of tests for structural change in regression models," Economics Letters, Elsevier, vol. 12(3-4), pages 283-287.
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Cited by:
  1. Reboredo, Juan C. & Rivera-Castro, Miguel A., 2013. "A wavelet decomposition approach to crude oil price and exchange rate dependence," Economic Modelling, Elsevier, vol. 32(C), pages 42-57.
  2. Lamarche, Jean-Francois, 2003. "A robust bootstrap test under heteroskedasticity," Economics Letters, Elsevier, vol. 79(3), pages 353-359, June.
  3. Rainer Schulz & Axel Werwatz, 2008. "House Prices and Replacement Cost: A Micro-Level Analysis," SFB 649 Discussion Papers SFB649DP2008-013, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  4. Andrea Brischetto & Graham Voss, 1999. "A Structural Vector Autoregression Model of Monetary Policy in Australia," RBA Research Discussion Papers rdp1999-11, Reserve Bank of Australia.
  5. Jinill Kim & Seth Pruitt, 2013. "Estimating Monetary Policy Rules When Nominal Interest Rates Are Stuck at Zero," CAMA Working Papers 2013-53, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  6. Schulz, Rainer & Werwatz, Axel, 2011. "Is there an equilibrating relationship between house prices and replacement cost? Empirical evidence from Berlin," Journal of Urban Economics, Elsevier, vol. 69(3), pages 288-302, May.

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