wrong estimation of the true number of shifts in structural break models: Theoretical and numerical evidence
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.
Volume (Year): 3 (2007)
Issue (Month): 3 ()
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- Perron, P. & Bai, J., 1995.
"Estimating and Testing Linear Models with Multiple Structural Changes,"
Cahiers de recherche
9552, Universite de Montreal, Departement de sciences economiques.
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- Jouini, Jamel & Boutahar, Mohamed, 2005. "Evidence on structural changes in U.S. time series," Economic Modelling, Elsevier, vol. 22(3), pages 391-422, May.
- Bai, Jushan, 1998. "A Note On Spurious Break," Econometric Theory, Cambridge University Press, vol. 14(05), pages 663-669, October.
- BAI, Jushan & PERRON, Pierre, 1998.
"Computation and Analysis of Multiple Structural-Change Models,"
Cahiers de recherche
9807, Universite de Montreal, Departement de sciences economiques.
- 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.
- 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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