Optimal Tests when a Nuisance Parameter is Present Only Under the Alternative

Andrews, Donald W.K.; Ploberger, Werner

doi:10.2307/2951753

Cited by 1,948 publications

(1,512 citation statements)

References 0 publications

Supporting

Mentioning

1,470

Contrasting

Unclassified

Order By: Relevance

“…This behavior is due, of course, to the correlation between the market and SMB or HML." Consistently, we can see in the correlation matrix from table 1 that the correlation between HM L and SM B is low and not signi cant, whereas it is signi cant between RM and HM L. Furthermore, the estimates for b i seem to be systematically lower in model (1). Adding the momentum factor to the regression (2) does not change the results.…”

Section: 2supporting

confidence: 71%

See 1 more Smart Citation

Common Risk Factors and the Macroeconomy: New Evidence from the Japanese Stock Market

Bretschger

Lechthaler

2012

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractUsing new data on returns and risk factors the paper considers the stock performance on the Japanese market, which is the second largest in the world and operates under unique macroeconomic conditions. We nd that the CAPM model is not an adequate approach for the Japanese market. The Carhart model performs reasonably well but fails to reject the null hypothesis of a zero intercept for the full period. Extended tests reveal a structural change in asset prices in the year 1998. When separating the sample into two periods, the standard four factor model explains market returns much better. We show that the relation between stock returns and risk factors is affected by macroeconomic conditions, especially when considering the momentum strategy. The Japanese case illustrates the necessity of considering structural instability related to the macroeconomic development, which is especially important for countries and time periods with a sluggish economy.

show abstract

Section: 2supporting

confidence: 71%

“…We refer to model (3) as the four-factor Carhart-like model where the momentum factor (W M L) is added to describe portfolio returns. Model (1) is applied to size-B/M-sorted portfolios only, whereas model (2) and (3) are applied to size-B/M-sorted as well as to size-momentum-sorted portfolios 1 .…”

Section: Introductionmentioning

confidence: 99%

Common Risk Factors and the Macroeconomy: New Evidence from the Japanese Stock Market

Bretschger

Lechthaler

2012

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…Andrews (1993) and Andrews and Ploberger (1994) addressed the short run parameter instability by using the Sup-F, Exp-F, Mean-F test. We apply Lc test (Nyblom, 1989;Hansen, 1992) to test for all parameters in the overall VAR system.…”

Section: Parameter Stability Testmentioning

confidence: 99%

Causal Relationship between Monetary Policy and the Stock Market: a Bootstrap Rolling Window Approach

Khan¹,

Qingyang²,

Khurshid³

2017

FMIR

View full text Add to dashboard Cite

This study examines the causal relationship between the monetary policy and the stock price in Pakistan. We use bootstrap Granger full-sample causality test and sub-sample rolling window estimation test for the period of 1992:01 to 2015:06. The empirical result shows that there is a unidirectional causality from monetary policy to the stock price. However, considering the structural changes, we assess the parameter stability by using the full sample for short run relationship and find the short run instability for the full sample. This recommends that full-sample data cannot depend upon for the precise result. To address the structural changes issue, we propose rolling window approach is used to revisit the causal relationship between the two series and the result reports the bi-directional causal relationship between the monetary policy and the stock market. The relationship between the stock market and the money supply is not consistent, and the upward trend may cause serious policy implication on the stock market for future investment and profit.

show abstract

“…Most tests for structural breaks in the literature, like the celebrated Chow (1960) tests, and those for unknown or multiple break dates in Andrews (1993), Andrews and Ploberger (1994) and Bai and Perron (1998) are appropriate when the break is relatively long lasting and happens in the middle of a sample. The distribution of the corresponding test statistic is suitably found using asymptotics in which the number of observations before and after the break point go to infinity.…”

Section: Introductionmentioning

confidence: 99%

“…The extension of the test to panel data, under the assumption of cross sectional independence, is relatively straightforward as shown in Mancini-Griffoli and Pauwels (2006). This extension assumes an alternative hypothesis that all individuals exhibit a break, as in other tests for structural breaks in the panel literature, like in Han and Park (1989) which extends the CUSUM tests, or Emerson andKao (2001, 2002), Bai and Ng (2004) and de Wachter and Tzavalis (2004) which build on Andrews (1993) and Andrews and Ploberger (1994). Yet, this approach does not address the interesting alternative that only some -and not all -individuals are affected by a break.…”

Section: Introductionmentioning

confidence: 99%

Stability Tests for Heterogeneous Panel Data

Chan¹,

Mancini-Griffoli²,

Pauwels

2008

SSRN Journal

View full text Add to dashboard Cite

Ce papier propose un nouveau test pour détecter des changements structurels en fin d'échantillons dans des panels hétérogènes. Le test se construit sur le travail de Andrews (2003) AbstractThis paper proposes a new test for structural instability in heterogeneous panels. The test builds on the seminal work of Andrews (2003) originally developed for time series. It is robust to non-normal, heteroskedastic and serially correlated errors, and allows for the number of post break observations to be small. Importantly, the test considers the alternative of a break affecting only some -and not all -individuals of the panel. Under mild assumptions the test statistic is shown to be asymptotically normal, thanks to the additional cross sectional dimension of panel data. This greatly facilitates the calculation of critical values. Monte Carlo experiments show that the test has good size and power under a wide range of circumstances. The test is then applied to investigate the effect of the Euro on trade.

show abstract

Optimal Tests when a Nuisance Parameter is Present Only Under the Alternative

Cited by 1,948 publications

References 0 publications

Common Risk Factors and the Macroeconomy: New Evidence from the Japanese Stock Market

Common Risk Factors and the Macroeconomy: New Evidence from the Japanese Stock Market

Causal Relationship between Monetary Policy and the Stock Market: a Bootstrap Rolling Window Approach

Stability Tests for Heterogeneous Panel Data

Contact Info

Product

Resources

About