TESTS FOR PARAMETER INSTABILITY IN DYNAMIC FACTOR MODELS

Tests for Parameter Instability in Dynamic Factor Models

We develop tests for structural breaks of factor loadings in dynamic factor models. We focus on the joint null hypothesis that all factor loadings are constant over time. Because the number of factor loading parameters goes to infinity as the sample size grows, the conventional test cannot be used. Based on the fact that the estimated factors will demonstrate a higher dimension under the altern...

Generalized M-Fluctuation Tests for Parameter Instability

A general class of fluctuation tests for parameter instability in an M-estimation framework is suggested. The tests are based on partial sum processes of M-estimation scores for which functional central limit theorems are derived under the null hypothesis of parameter stability and local alternatives. Special emphasis is given to parameter instability in (generalized) linear regression models a...

Tests for Parameter Constancy in Regression Models

Forecasting in Dynamic Factor Models Subject to Structural Instability

Optimal tests for nested model selection with underlying parameter instability

This paper develops optimal tests for model selection between two nested models in the presence of underlying parameter instability. These are joint tests for both parameter instability and a null hypothesis on a subset of the parameters. They modify the existing tests for parameter instability to allow the parameter vector to be unknown. These tests statistics are useful if one is interested i...