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A CUSUMSQ test for structural breaks in error variance for a long memory heterogeneous autoregressive model

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  • Hwang, Eunju
  • Shin, Dong Wan

Abstract

For testing error variance instability, a test based on CUSUM squares of the residuals in HAR model is constructed and its limiting null distribution is derived to be a simple function of the standard Brownian bridge. A finite sample Monte-Carlo experiment shows reasonable size and power performances of the proposed test. The test is applied to the log-return realized volatilities of some stock price index and exchange rate to find evidence for variance instability after adjusting long-memories.

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  • Hwang, Eunju & Shin, Dong Wan, 2015. "A CUSUMSQ test for structural breaks in error variance for a long memory heterogeneous autoregressive model," Statistics & Probability Letters, Elsevier, vol. 99(C), pages 167-176.
    • Handle: RePEc:eee:stapro:v:99:y:2015:i:c:p:167-176
    DOI: 10.1016/j.spl.2015.01.013
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    2. Song, Junmo & Baek, Changryong, 2019. "Detecting structural breaks in realized volatility," Computational Statistics & Data Analysis, Elsevier, vol. 134(C), pages 58-75.

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