Random Coefficient Continuous Systems: Testing for Extreme Sample Path Behaviour∗
نویسندگان
چکیده
This paper studies a continuous time dynamic system with a random persistence parameter. The exact discrete time representation is obtained and related to several discrete time random coefficient models currently in the literature. The model distinguishes various forms of unstable and explosive behaviour according to specific regions of the parameter space that open up the potential for testing these forms of extreme behaviour. A two-stage approach that employs realized volatility is proposed for the continuous system estimation, asymptotic theory is developed, and test statistics to identify the different forms of extreme sample path behaviour are proposed. Simulations show that the proposed estimators work well in empirically ∗Yubo Tao, School of Economics, Singapore Management University, 90 Stamford Road, Singapore 178903. Email: [email protected]. Peter C.B. Phillips, Cowles Foundation for Research in Economics, Yale University, Box 208281, Yale Station, New Haven, Connecticut 06520-8281. Email: [email protected]. Jun Yu, School of Economics and Lee Kong Chian School of Business, Singapore Management University, 90 Stamford Road, Singapore 178903. Email: [email protected].
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