Statistical Modelling 7 (2007), 345362
Parameter instability in quantile regression
Marilena Furno
Department of Economics,
Università di Cassino,
Via Orazio 27/D,
I80122 Napoli
Italy
eMail:
furnoma@tin.it
Abstract:
The paper analyzes the behavior of a test for structural break based
on quantile regression estimates. It considers the case of an estimated
break in conjunction with independent and identically distributed
(i.i.d.) and non-i.i.d. errors. It compares the null and the alternative
models, where the null imposes stability, while the alternative allows
the regression coefficients to change in response to the break. The test
relies on the increase of the objective function and the worsening of
the fit when unnecessary constraints are imposed. An example with
serially correlated real data and a Monte Carlo study taking into
account non-normal and non-i.i.d. errors analyze the behavior of the test.
Keywords:
likelihood ratio test • quantile regression • robustness • structural break
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