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

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2
Q

What is the Chow test used for?

A

Detecting a structural break when the break date is known.

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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

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4
Q

Why are structural break tests important?

A

Because ignoring breaks can lead to biased estimates and poor forecasts.

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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.

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6
Q
A
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