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Tests to Disentangle Breaks in Intercept from Slope in Linear Regression Models with Application to Management Performance in the Mutual Fund Industry


  • Jose Olmo
  • William Pouliot


This article introduces a U-statistic type process that is fashioned from a kernal which can depend on nuisance parameters. It is shown that this process can accommodate, in a straightforward manner, anti-symmetric kernels, which have proved useful for detecting changing patterns in the dynamics of time series, and weight functions. Weight functions have been shown to improve the power of test statistics employed to detect these changing patterns throughout the evaluation perios; early and late as well. Theory and related test statistics are developed here and applied to detection of structural breaks in linear regression models (LRM). This flexibility is exploited to develop tests to detect changes in intercept or slope in LRMs that are robust to changes in the rest of medal parameters. The statistics developed here are applied to detect changing patterns in mutual fund manager's stock selecting ability over the period 2001 to 2010.

Suggested Citation

  • Jose Olmo & William Pouliot, 2014. "Tests to Disentangle Breaks in Intercept from Slope in Linear Regression Models with Application to Management Performance in the Mutual Fund Industry," Discussion Papers 14-02, Department of Economics, University of Birmingham.
  • Handle: RePEc:bir:birmec:14-02

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    References listed on IDEAS

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    5. Burcu Kapar & William Pouliot, 2013. "Multiple Change-Point Detection in Linear Regression Models via U-Statistic Type Processes," Discussion Papers 13-13, Department of Economics, University of Birmingham.
    6. Hansen, Bruce E., 2000. "Testing for structural change in conditional models," Journal of Econometrics, Elsevier, vol. 97(1), pages 93-115, July.
    7. 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.
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    Cited by:

    1. Pouliot, William, 2016. "Robust tests for change in intercept and slope in linear regression models with application to manager performance in the mutual fund industry," Economic Modelling, Elsevier, vol. 58(C), pages 523-534.

    More about this item


    Change-Point tests; CUSUM test; Linear regression models; Stochastic processes; U-Statistics;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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