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Minimax Risk in Estimating Kink Threshold and Testing

Author

Listed:
  • Javier Hidalgo
  • Heejun Lee
  • Heejun Lee
  • Jungyoon Lee
  • Myung Hwan Seo

Abstract

We derive a risk lower bound in estimating the threshold parameter without knowing whether the threshold regression model is continuous or not. The bound goes to zero as the sample size n grows only at the cube root rate. Motivated by this nding, we develop a continuity test for the threshold regression model and a bootstrap to compute its p-values. The validity of the bootstrap is established, and its nite sample property is explored through Monte Carlo simulations.

Suggested Citation

  • Javier Hidalgo & Heejun Lee & Heejun Lee & Jungyoon Lee & Myung Hwan Seo, 2021. "Minimax Risk in Estimating Kink Threshold and Testing," STICERD - Econometrics Paper Series 622, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stiecm:622
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    File URL: https://sticerd.lse.ac.uk/dps/em/em622.pdf
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    References listed on IDEAS

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    1. Chang, Yoosoon & Choi, Yongok & Park, Joon Y., 2017. "A new approach to model regime switching," Journal of Econometrics, Elsevier, vol. 196(1), pages 127-143.
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    More about this item

    Keywords

    Continuity Test; Kink; Risk lower bound; Unknown Threshold;
    All these keywords.

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