Arbeitspapier

Testing for Parameter Instability in Competing Modeling Frameworks

We develop a new parameter stability test against the alternative of observation driven generalized autoregressive score dynamics. The new test generalizes the ARCH-LM test of Engle (1982) to settings beyond time-varying volatility and exploits any autocorrelation in the likelihood scores under the alternative. We compare the test's performance with that of alternative tests developed for competing time-varying parameter frameworks, such as structural breaks and observation driven parameter dynamics. The new test has higher and more stable power against alternatives with frequent regime switches or with non-local parameter driven time-variation. For parameter driven time variation close to the null or for infrequent structural changes, the test of Muller and Petalas (2010) performs best overall. We apply all tests empirically to a panel of losses given default over the period 1982--2010 and find significant evidence of parameter variation in the underlying beta distribution.

Sprache
Englisch

Erschienen in
Series: Tinbergen Institute Discussion Paper ; No. 14-010/IV/DSF71

Klassifikation
Wirtschaft
Hypothesis Testing: General
Model Evaluation, Validation, and Selection
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Thema
time-varying parameters
observation driven models
parameter driven models
structural breaks
generalized autoregressive score model
regime switching
credit risk

Ereignis
Geistige Schöpfung
(wer)
Calvori, Francesco
Creal, Drew
Koopman, Siem Jan
Lucas, Andre
Ereignis
Veröffentlichung
(wer)
Tinbergen Institute
(wo)
Amsterdam and Rotterdam
(wann)
2014

Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Calvori, Francesco
  • Creal, Drew
  • Koopman, Siem Jan
  • Lucas, Andre
  • Tinbergen Institute

Entstanden

  • 2014

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