Detecting structural changes under nonstationary volatility

摘要

This paper shows that the U-statistic for moment condition stability proposed by Juhl and Xiao (2013) can be used to test against structural changes in regression coefficients under nonstationary volatility. We investigate the power property under the alternative, and prove that the test is consistent against single break, multiple breaks and smooth structural changes. Finally, we advocate using a bootstrap method to improve its size performance in finite samples. (C) 2016 Elsevier B.V. All rights reserved.