Testing and Locating Variance Changepoints with Application to Stock Prices

Jie Chen, A. K. Gupta

Research output: Contribution to journalArticle

157 Citations (Scopus)

Abstract

This article explores testing and locating multiple variance changepoints in a sequence of independent Gaussian random variables (assuming known and common mean). This type of problem is very common in applied economics and finance. A binary procedure combined with the Schwarz information criterion (SIC) is used to search all of the possible variance changepoints existing in the sequence. The simulated power of the proposed procedure is compared to that of the CUSUM procedure used by Inclán and Tiao to cope with variance changepoints. The SIC and unbiased SIC for this problem are derived. To obtain the percentage points of the SIC criterion, the asymptotic null distribution of a function of the SIC is obtained, and then the approximate percentage points of the SIC are tabulated. Finally, the results are applied to the weekly stock prices. The unknown but common mean case is also outlined at the end.

Original languageEnglish (US)
Pages (from-to)739-747
Number of pages9
JournalJournal of the American Statistical Association
Volume92
Issue number438
DOIs
StatePublished - Jun 1 1997

Fingerprint

Information Criterion
Stock Prices
Change Point
Testing
Common Mean
Percentage Points
Cumulative Sum
Null Distribution
Finance
Asymptotic distribution
Information criterion
Stock prices
Change point
Random variable
Economics
Binary
Unknown

Keywords

  • Asymptotic distribution
  • Consistency
  • Cumulative sum
  • Hypothesis testing
  • Information criterion
  • Return series
  • Unbiased estimator

ASJC Scopus subject areas

  • Statistics and Probability
  • Statistics, Probability and Uncertainty

Cite this

Testing and Locating Variance Changepoints with Application to Stock Prices. / Chen, Jie; Gupta, A. K.

In: Journal of the American Statistical Association, Vol. 92, No. 438, 01.06.1997, p. 739-747.

Research output: Contribution to journalArticle

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