Change Point Tests in Functional Factor Models with Application to Yield Curves

32 Pages Posted: 22 Mar 2017

See all articles by Patrick Bardsley

Patrick Bardsley

University of Texas at Austin

Lajos Horváth

University of Utah - Department of Mathematics

Piotr Kokoszka

Utah State University - Department of Mathematics & Statistics

Gabriel Young

Columbia University

Date Written: February 2017

Abstract

Motivated by the problem of the detection of a change point in the mean structure of yield curves, we introduce several methods to test the null hypothesis that the mean structure of a time series of curves does not change. The mean structure does not refer merely to the level of the curves, but also to their range and other aspects of their shape, most prominently concavity. The performance of the tests depends on whether possible break points in the error structure, which refers to the random variability in the aspects of the curves listed above, are taken into account or not. If they are not taken into account, then an existing change point in the mean structure may fail to be detected with a large probability. The paper contains a complete asymptotic theory, a simulation study and illustrative data examples, as well as details of the numerical implementation of the testing procedures.

Keywords: Change point, Functional time series, Yield curve

Suggested Citation

Bardsley, Patrick and Horváth, Lajos and Kokoszka, Piotr and Young, Gabriel, Change Point Tests in Functional Factor Models with Application to Yield Curves (February 2017). The Econometrics Journal, Vol. 20, Issue 1, pp. 86-117, 2017. Available at SSRN: https://ssrn.com/abstract=2938773 or http://dx.doi.org/10.1111/ectj.12075

Patrick Bardsley (Contact Author)

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Lajos Horváth

University of Utah - Department of Mathematics ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States
801 581-8159 (Phone)

Piotr Kokoszka

Utah State University - Department of Mathematics & Statistics ( email )

3900 Old Main Hill
Logan, UT 84322-3530
United States
435-797-0746 (Phone)
435-797-1822 (Fax)

HOME PAGE: http://www.math.usu.edu/~piotr/

Gabriel Young

Columbia University

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