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Discriminating mean and variance shifts

Author

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  • Carlos Santos

    () (Faculdade de Economia e Gestão, Universidade Católica Portuguesa - Porto)

Abstract

A two-stage procedure based on impulse saturation is suggested to distinguish mean and variance shifts. The resulting zero-mean innovation test statistic has a non standard distribution, with a nuisance parameter. Hence, simulation-based critical values are provided for some cases of interest. Monte Carlo evidence reveals the test has good power properties to discriminate mean and variance shifts identified through the impulse saturation break test.

Suggested Citation

  • Carlos Santos, 2007. "Discriminating mean and variance shifts," Working Papers de Economia (Economics Working Papers) 14, Católica Porto Business School, Universidade Católica Portuguesa.
  • Handle: RePEc:cap:wpaper:142007
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    File URL: http://www.feg.porto.ucp.pt/docentes/repec/WP/142007%20-%20Santos%20-%20Discriminating%20mean%20and%20variance%20shifts.pdf
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    Cited by:

    1. Santos, Carlos, 2008. "Impulse saturation break tests," Economics Letters, Elsevier, vol. 98(2), pages 136-143, February.

    More about this item

    Keywords

    breaks; mean shift; variance shift; impulse saturation; nuisance parameter;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: 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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