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Improving the Finite Sample Performance of Tests for a Shift in Mean


  • YAMAZAKI, Daisuke
  • KUROZUMI, Eiji


It is widely known that structural break tests based on the long-run variance estimator, which is estimated under the alternative, suffer from serious size distortion when the errors are serially correlated. In this paper, we propose bias-corrected tests for a shift in mean by correcting the bias of the long-run variance estimator up to O(1/T). Simulation results show that the proposed tests have good size and high power.

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  • YAMAZAKI, Daisuke & KUROZUMI, Eiji, 2014. "Improving the Finite Sample Performance of Tests for a Shift in Mean," Discussion Papers 2014-16, Graduate School of Economics, Hitotsubashi University.
  • Handle: RePEc:hit:econdp:2014-16

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    References listed on IDEAS

    1. Deng, Ai & Perron, Pierre, 2008. "A non-local perspective on the power properties of the CUSUM and CUSUM of squares tests for structural change," Journal of Econometrics, Elsevier, vol. 142(1), pages 212-240, January.
    2. Pierre Perron & Yohei Yamamoto, 2016. "On the Usefulness or Lack Thereof of Optimality Criteria for Structural Change Tests," Econometric Reviews, Taylor & Francis Journals, vol. 35(5), pages 782-844, May.
    3. Kejriwal, Mohitosh, 2009. "Tests for a mean shift with good size and monotonic power," Economics Letters, Elsevier, vol. 102(2), pages 78-82, February.
    4. Jingjing Yang & Timothy J. Vogelsang, 2011. "Fixed‐b analysis of LM‐type tests for a shift in mean," Econometrics Journal, Royal Economic Society, vol. 14(3), pages 438-456, October.
    5. Patterson, K. D., 2000. "Bias reduction in autoregressive models," Economics Letters, Elsevier, vol. 68(2), pages 135-141, August.
    6. Shao, Xiaofeng & Zhang, Xianyang, 2010. "Testing for Change Points in Time Series," Journal of the American Statistical Association, American Statistical Association, vol. 105(491), pages 1228-1240.
    7. Sayginsoy, Özgen & Vogelsang, Timothy J., 2011. "Testing For A Shift In Trend At An Unknown Date: A Fixed-B Analysis Of Heteroskedasticity Autocorrelation Robust Ols-Based Tests," Econometric Theory, Cambridge University Press, vol. 27(05), pages 992-1025, October.
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    More about this item


    structural change; long-run variance; bias correction;

    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

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