Stochastic Permanent Breaks
This paper bridges the gap between processes where shocks are permanent and those with transitory shocks by formulating a process in which the long-run impact of each innovation is time-varying and stochastic. In the stochastic permanent breaks (STOPBREAK) process, frequent transitory shocks are supplemented by occasional permanent shifts. Consistency and asymptotic normality of quasi-maximum-likelihood estimates is established, and locally best hypothesis tests of the null of a random walk are developed. The model is applied to relative prices of pairs of stocks and significant test statistics result. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
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Volume (Year): 81 (1999)
Issue (Month): 4 (November)
Pages: 553-574
| Handle: | RePEc:tpr:restat:v:81:y:1999:i:4:p:553-574 |
| Contact details of provider: | Web page: http://mitpress.mit.edu/journals/
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| Order Information: | Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535 |
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