Testing for Break in Persistence Under Long Memory and Variance Break

Zhaobo CHU, Hao JIN

Abstract


We consider the problem of testing for a break in persistence with long memory when the long memory is subject a variance break. The limiting distribution is derived under the null and the alternative hypothesis. The CUSUM of squared-based test diverge to infinity under the against of alternative as the sample size grows. We find that the size and power of the CUSUM of squared-based test suffer severe distortions due to negligible variance break. The numerical simulation results are consistent with our theoretical analysis.

Keywords


Variance change; Long memory series; CUSUM of squared-based test; Break of persistence

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References


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DOI: http://dx.doi.org/10.3968/10239

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