Structural Breaks in Time Series Flashcards
1
Q
What is a structural break in a time series
A
A change in the parameters of the model (e.g. intercept or slope) at a point in time
2
Q
What is the Chow test used for?
A
Detecting a structural break when the break date is known.
3
Q
What does the QLR test do?
A
Tests for a break at an unknown date by running multiple Chow tests and taking the max F-stat
4
Q
Why are structural break tests important?
A
Because ignoring breaks can lead to biased estimates and poor forecasts.
5
Q
Why use the QLR test instead of the Chow test?
A
The Chow test requires a known break date; QLR finds the break by testing all possible points.
6
Q
A