Localized level crossing random walk test robust to the presence of structural breaks

Alexeev, V; Maynard, A

Localized level crossing random walk test robust to the presence of structural breaks

Alexeev, V

Maynard, A

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Publication Type:: Journal Article
Citation:: Computational Statistics and Data Analysis, 2012, 56 (11), pp. 3322 - 3344
Issue Date:: 2012-11-01

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Field	Value	Language
dc.contributor.author	Alexeev, V https://orcid.org/0000-0003-3092-2500	en_US
dc.contributor.author	Maynard, A	en_US
dc.date.issued	2012-11-01	en_US
dc.identifier.citation	Computational Statistics and Data Analysis, 2012, 56 (11), pp. 3322 - 3344	en_US
dc.identifier.issn	0167-9473	en_US
dc.identifier.uri	http://hdl.handle.net/10453/115144
dc.description.abstract	A modified version of the nonparametric level crossing random walk test is proposed, in which the crossing level is determined locally. This modification results in a test that is robust to unknown multiple structural breaks in the level and slope of the trend function under both the null and alternative hypotheses. No knowledge regarding the number or timing of the breaks is required. An algorithm is proposed to select the degree of localization in order to maximize bootstrapped power in a proximate model. A computational procedure is then developed to adjust the critical values for the effect of this selection procedure by replicating it under the null hypothesis. The test is applied to Canadian nominal inflation and nominal interest rate series with implications for the Fisher hypothesis. © 2010 Elsevier B.V. All rights reserved.	en_US
dc.relation.ispartof	Computational Statistics and Data Analysis	en_US
dc.relation.isbasedon	10.1016/j.csda.2010.06.026	en_US
dc.subject.classification	Statistics & Probability	en_US
dc.title	Localized level crossing random walk test robust to the presence of structural breaks	en_US
dc.type	Journal Article
utslib.citation.volume	11	en_US
utslib.citation.volume	56	en_US
utslib.for	0104 Statistics	en_US
utslib.for	0802 Computation Theory and Mathematics	en_US
utslib.for	1403 Econometrics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	closed_access
pubs.issue	11	en_US
pubs.publication-status	Published	en_US
pubs.volume	56	en_US

Abstract:

A modified version of the nonparametric level crossing random walk test is proposed, in which the crossing level is determined locally. This modification results in a test that is robust to unknown multiple structural breaks in the level and slope of the trend function under both the null and alternative hypotheses. No knowledge regarding the number or timing of the breaks is required. An algorithm is proposed to select the degree of localization in order to maximize bootstrapped power in a proximate model. A computational procedure is then developed to adjust the critical values for the effect of this selection procedure by replicating it under the null hypothesis. The test is applied to Canadian nominal inflation and nominal interest rate series with implications for the Fisher hypothesis. © 2010 Elsevier B.V. All rights reserved.

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http://hdl.handle.net/10453/115144