Structural Breaks in Financial Time Series

55 Pages Posted: 31 Dec 2007 Last revised: 18 Sep 2012

Elena Andreou

University of Cyprus - Department of Economics

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Date Written: October 6, 2006

Abstract

This paper reviews the literature on structural breaks in financial time series. First we discuss the implications of structural breaks in financial time series for statistical inference purposes. In the second section we discuss the relevant asymptotic results and issues involved in general classifications of change-point tests in financial time series such historical versus sequential tests, parametric versus nonparametric tests and single versus multiple break tests. The third section reviews a number of structural change tests by focusing on certain characteristics or moments of financial time series such as structural break tests in the financial asset returns and volatility, long memory, tails and distribution. In addition, we review changepoint tests for the co-dependence between financial asset returns processes in the context of multivariate volatility models, copulae and last but not least asset pricing. In concluding we provide some areas of future research in the subject.

Keywords: Structural change, historical tests, sequential tests

JEL Classification: C1, C23

Suggested Citation

Andreou, Elena and Ghysels, Eric, Structural Breaks in Financial Time Series (October 6, 2006). Available at SSRN: https://ssrn.com/abstract=935971 or http://dx.doi.org/10.2139/ssrn.935971

Elena Andreou

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+357 2 892449 (Phone)
+357 2 892432 (Fax)

Eric Ghysels (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://www.unc.edu/~eghysels/

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