Tests for cointegration with structural breaks based on subsamples

This paper considers tests for cointegration with allowance for structural breaks, using the extrema of residual-based tests over subsamples of the data. One motivation for the approach is to formalize the practice of data snooping by practitioners, who may examine subsamples after failing to ...nd a predicted cointegrating relationship. Valid critical values for such multiple testing situations may be useful. The methods also have the advantage of not imposing a form for the alternative hypothesis, in particular slope vs. intercept shifts and single versus multiple breaks, and being comparatively easy to compute. A range of alternative subsampling procedures, including sample splits, incremental and rolling samples are tabulated and compared experimentally. Shiller's annual stock prices and dividends series provide an illustration. 1 

• Type: Journal
• Year: 2010
• Where: CSDA
• Authors: James Davidson, Andrea Monticini
• Keywords: CSDA 2010, Multiple Testing Situations, Valid Critical Values, Versus Multiple Breaks