We consider testing for the presence of a change in mean, at an unknown point in the sample, in data that are possibly fractionally integrated, and of unknown order. This testing problem has recently been considered in a number of papers, most notably Shao (2011, "A Simple Test of Changes in Mean in the Possible Presence of Long-Range Dependence." Journal of Time Series Analysis 32:598-606) and Iacone, Leybourne, and Taylor (2013b, "A Fixed-b Test for a Break in Level at an Unknown Time under Fractional Integration." Journal of Time Series Analysis 35:40-54) who employ Wald-type statistics based on OLS estimation and rely on a self-normalization to overcome the fact that the standard Wald statistic does not have a well-defined limiting distribution across different values of the memory parameter. Here, we consider an alternative approach that uses the standard Wald statistic but is based on quasi-GLS estimation to control for the effect of the memory parameter. We show that this approach leads to significant improvements in asymptotic local power.

Testing for a change in mean under fractional integration / F. Iacone, S.J. Leybourne, A.M.R. Taylor. - In: JOURNAL OF TIME SERIES ECONOMETRICS. - ISSN 1941-1928. - 9:1(2017), pp. 1-8. [10.1515/jtse-2015-0006]

Testing for a change in mean under fractional integration

F. Iacone
;
2017

Abstract

We consider testing for the presence of a change in mean, at an unknown point in the sample, in data that are possibly fractionally integrated, and of unknown order. This testing problem has recently been considered in a number of papers, most notably Shao (2011, "A Simple Test of Changes in Mean in the Possible Presence of Long-Range Dependence." Journal of Time Series Analysis 32:598-606) and Iacone, Leybourne, and Taylor (2013b, "A Fixed-b Test for a Break in Level at an Unknown Time under Fractional Integration." Journal of Time Series Analysis 35:40-54) who employ Wald-type statistics based on OLS estimation and rely on a self-normalization to overcome the fact that the standard Wald statistic does not have a well-defined limiting distribution across different values of the memory parameter. Here, we consider an alternative approach that uses the standard Wald statistic but is based on quasi-GLS estimation to control for the effect of the memory parameter. We show that this approach leads to significant improvements in asymptotic local power.
Change in mean; Fractional integration; Wald statistic; Economics and Econometrics
Settore SECS-S/03 - Statistica Economica
Settore SECS-P/05 - Econometria
2017
Article (author)
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/524726
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