Title: CUSUM based ratio tests for parameter constancy: With application to variance stability
Authors: Paulo Rodrigues - Universidade Nova de Lisboa (Portugal) [presenting]
Uwe Hassler - Goethe University Frankfurt (Germany)
Mehdi Hosseinkouchack - Goethe University Frankfurt (Germany)
Antonio Rubia - University of Alicante (Spain)
Abstract: New CUSUM based ratio tests for parameter constancy are introduced following a class of ratio tests recently proposed, which are based on a Karhunen-Loeve expansion. Analytical results as well as an in-depth Monte Carlo analysis is performed to evaluate the finite sample performance of the procedure and a comparison with available procedures is also provided. The new procedure presents interesting finite sample size and power behaviour. An empirical application is also included.