Abstract
This chapter focuses on various structural change and monitoring tests for a class of widely used time series models in economics and finance, including I(0), I(1), I(d) processes and the cointegration relationship. A structural break appears a change in endogenous relationships. This break could be caused by a shift in mean, variance, or a persistent change in the data property. In general, structural change tests can be categorized into two types: one is the classical approach to testing for structural change, which employs retrospective tests using a historical data set of a given length; the other one is the fluctuation-type test in a monitoring scheme, which means for given a history period for which a regression relationship is known to be stable, we then test whether incoming data are consistent with the previously established relationship. Several structural changes such as CUSUM squared tests, the QLR test, the prediction test, the multiple break test, bubble tests, cointegration breakdown tests, and the monitoring fluctuation test are discussed in this chapter, and we further illustrate all details and usefulness of these tests.
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Wang, C.SH., Xie, Y.M. (2015). Structural Change and Monitoring Tests. In: Lee, CF., Lee, J. (eds) Handbook of Financial Econometrics and Statistics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7750-1_31
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