Testing for Parameter Instability in Competing Modeling Frameworks

Calvori, Francesco; Creal, Drew; Koopman, Siem Jan; Lucas, André

doi:10.2139/ssrn.2379997

Cited by 3 publications

(3 citation statements)

References 48 publications

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“…The estimators' and their standard deviations' changeability was already presented as main quantitative measures in this sense (see for example Borenstein et al, 2009;Nelson and Kennedy, 2009). Complex implications of such a phenomenon (from confusing analytical statements to considerable forecasting biases) and a large set of testing its presence in modeling works have also received special attention (Dufour, 1982;Hansen, 1992;Andrews, 1993;Stock and Watson, 1996;Zivot, 2003;Pesaran et al, 2004;Rossi, 2004;Zeileis and Hornik, 2007;Bates et al, 2012;Farhani, 2012;Hendry and Mizon, 2013;Calvori et al, 2014;Pettenuzzo and Timmermann, 2015). Similar questions can be asked in other fields as well (Brigode et al, 2013;Li et al, 2015, are presented as illustrations), which substantially enlarges the perimeter of multidisciplinary scientific interferences.…”

Section: Introduction: Research Methodologymentioning

confidence: 99%

Modelling an emergent economy and parameter instability problem

Dobrescu

2023

SSRN Journal

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Section: Introduction: Research Methodologymentioning

confidence: 99%

Modelling an emergent economy and parameter instability problem

Dobrescu

2023

SSRN Journal

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“…The GAS Lagrange Multiplier is a test (Calvori et al (2013)) where, under the null, no dynamics other than periodic is present. More formally, the null hypothesis states that β t = 0 against a β t driven only by the lagged scores; specifically, in order to avoid the well-known identification issue (cf.…”

Section: Model Inference and Diagnosticsmentioning

confidence: 99%

Go with the Flow: A GAS Model For Predicting Intra-Daily Volume Shares

2013

Self Cite

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The Volume Weighted Average Price (VWAP) mixes volumes and prices at intra-daily intervals and is a benchmark measure frequently used to evaluate a trader's performance. Under suitable assumptions, splitting a daily order according to ex-ante volume predictions is a good strategy to replicate the VWAP. To bypass possible problems generated by local trends in volumes, we propose a novel Generalized Autoregressive Score (GAS) model for predicting volume shares (relative to the daily total), inspired by the empirical regularities of the observed series (intra-daily periodicity pattern, residual serial dependence). An application to six NYSE tickers confirms the suitability of the model proposed in capturing the features of intra-daily dynamics of volume shares.

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“…To deal with the nuisance parameter issue we will apply the supremum test developed in Davies (1987). This method has been widely used and shown to be effective in accommodating nuisance parameters -see Andrews and Ploberger (1994), Andrews and Ploberger (1996), Fokianos and Fried (2012) and Calvori et al (2014) for example. Further to the issue of nuisance parameters, in parameter driven models the asymptotic distribution of model based tests such as likelihood ratio and Wald tests, under the null hypothesis of no serial dependence, are non-standard with an approximate distribution more complicated than the chi-squared distribution.…”

Section: Introductionmentioning

confidence: 99%

Testing for Serial Dependence in Binomial Time Series I: Parameter Driven Models

Dunsmuir¹,

He²

2016

Preprint

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Binomial time series in which the logit of the probability of success is modelled as a linear function of observed regressors and a stationary latent Gaussian process are considered. Score tests are developed to first test for the existence of a latent process and, subsequent to that, evidence of serial dependence in that latent process. The test for the existence of a latent process is important because, if one is present, standard logistic regression methods will produce inconsistent estimates of the regression parameters. However the score test is non-standard and any serial dependence in the latent process will require consideration of nuisance parameters which cannot be estimated under the null hypothesis of no latent process. The paper describes how a supremum-type test can be applied. If a latent process is detected, consistent estimation of its variance and the regression parameters can be done using marginal estimation which is easily implemented using generalised linear mixed model methods. The test for serial dependence in a latent process does not involve nuisance parameters and is based on the covariances between residuals centered at functions of the latent process conditional on the observations. This requires numerical integration in order to compute the test statistic. Relevant asymptotic results are derived and confirmed using simulation evidence. Application to binary and binomial time series is made. For binary series in particular, a complication is that the variance of the latent process, even if present, can be estimated to be zero with a high probability.

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Testing for Parameter Instability in Competing Modeling Frameworks

Cited by 3 publications

References 48 publications

Modelling an emergent economy and parameter instability problem

Modelling an emergent economy and parameter instability problem

Go with the Flow: A GAS Model For Predicting Intra-Daily Volume Shares

Testing for Serial Dependence in Binomial Time Series I: Parameter Driven Models

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