Open AccessChange point tests in functional factor models with application to yield curves
Author(s) -
Bardsley Patrick,
Horváth Lajos,
Kokoszka Piotr,
Young Gabriel
Publication year - 2017
Publication title -
the econometrics journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.861
H-Index - 36
eISSN - 1368-423X
pISSN - 1368-4221
DOI - 10.1111/ectj.12075
Subject(s) - mathematics , point (geometry) , series (stratigraphy) , range (aeronautics) , statistics , yield curve , null hypothesis , econometrics , term (time) , geometry , paleontology , materials science , physics , quantum mechanics , composite material , biology
Summary 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.