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Bootstrap tests for structural change with infinite variance observations

  • Jin, Hao
  • Tian, Zheng
  • Qin, Ruibing
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    The quest of structural change with infinite variance observations appears to be relatively common. Conventional residual CUSUM of squares test (RCUSQ) are unreliable in the presence of such behavior, having nonpivotal asymptotic null distributions. In this paper we propose a residual-based bootstrap approach to RCUSQ testing that is valid against a range of infinite variance processes. Our proposed method does not require the practitioners to specify knowledge for tailed index. Consistency and the rate of convergence for the estimated change point are also obtained. We also show via simulations that our asymptotic results provide good approximations in finite samples. In addition, we apply our results to investigate the original returns for NO.1 SDS using a historical data set that covers the period 1999-2002.

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    Article provided by Elsevier in its journal Statistics & Probability Letters.

    Volume (Year): 79 (2009)
    Issue (Month): 19 (October)
    Pages: 1985-1995

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    Handle: RePEc:eee:stapro:v:79:y:2009:i:19:p:1985-1995
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    1. Su, Liangjun & Xiao, Zhijie, 2008. "Testing for parameter stability in quantile regression models," Statistics & Probability Letters, Elsevier, vol. 78(16), pages 2768-2775, November.
    2. Ibragimov, Rustam, 2008. "Heavy-tailedness and Threshold Sex Determination," Scholarly Articles 2623659, Harvard University Department of Economics.
    3. Nunes, Luis C. & Kuan, Chung-Ming & Newbold, Paul, 1995. "Spurious Break," Econometric Theory, Cambridge University Press, vol. 11(04), pages 736-749, August.
    4. 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.
    5. Piotr Kokoszka & Michael Wolf, 2004. "Subsampling the mean of heavy-tailed dependent observations," Journal of Time Series Analysis, Wiley Blackwell, vol. 25(2), pages 217-234, 03.
    6. Horváth, Lajos & Kokoszka, Piotr, 2003. "A bootstrap approximation to a unit root test statistic for heavy-tailed observations," Statistics & Probability Letters, Elsevier, vol. 62(2), pages 163-173, April.
    7. Ibragimov, Rustam, 2008. "Heavy-tailedness and threshold sex determination," Statistics & Probability Letters, Elsevier, vol. 78(16), pages 2804-2810, November.
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