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The Moving-Estimates Test for ParameterStability

Published online by Cambridge University Press:  11 February 2009

Chia-Shang James Chu ,
Kurt Hornik  and
Chung-Ming Kuan
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Abstract

In this paper a new class of tests for parameterstability, the moving-estimates (ME) test, isproposed. It is shown that in the standard situationthe ME test asymptotically equivalent to the maximallikelihood ratio test under the alternative of atemporary parameter shift. It is also shown that theasymptotic null distribution of the ME test isdetermined by the increments of a vector Brownianbridge and that under a broad class of alternativesthe ME test is consistent and has nontrivial localpower in general. Our simulations also demonstratethat the proposed test has power superior to othercompeting tests when parameters are temporarilyinstable.

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Type
Research Article
Information
Econometric Theory , Volume 11 , Issue 4 , August 1995 , pp. 699 - 720
Copyright
Copyright © Cambridge University Press 1995

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