The MOSUM of squares test for monitoring variance changes

Chih Chiang Hsu

doi:10.1016/j.frl.2007.09.003

The MOSUM of squares test for monitoring variance changes

Chih Chiang Hsu

Graduate Institute of Accounting

Research output: Contribution to journal › Article › peer-review

8 Scopus citations

Abstract

In this paper we propose the MOSUM of squares test for monitoring potential variance changes when new observations arrive. It is shown that the limiting distribution of the proposed test is determined by the increments of the Brownian bridge. Finite-sample simulations examine empirical sizes and average detection delays of the proposed test. We apply the proposed test to study how soon a variance change can be detected for the yen/$ exchange rate and the S&P 500 stock index.

Original language	English
Pages (from-to)	254-260
Number of pages	7
Journal	Finance Research Letters
Volume	4
Issue number	4
DOIs	https://doi.org/10.1016/j.frl.2007.09.003
State	Published - Dec 2007

Keywords

Currency crisis
Monitoring structural change
MOSUM of squares test

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10.1016/j.frl.2007.09.003

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abstract = "In this paper we propose the MOSUM of squares test for monitoring potential variance changes when new observations arrive. It is shown that the limiting distribution of the proposed test is determined by the increments of the Brownian bridge. Finite-sample simulations examine empirical sizes and average detection delays of the proposed test. We apply the proposed test to study how soon a variance change can be detected for the yen/$ exchange rate and the S&P 500 stock index.",

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author = "Hsu, {Chih Chiang}",

note = "Funding Information: I thank the editor and the anonymous referees for their useful comments and suggestions on the original manuscript. Financial support is acknowledged from the National Science Council of the Republic of China (NSC89-2415-H-008-009). ",

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N2 - In this paper we propose the MOSUM of squares test for monitoring potential variance changes when new observations arrive. It is shown that the limiting distribution of the proposed test is determined by the increments of the Brownian bridge. Finite-sample simulations examine empirical sizes and average detection delays of the proposed test. We apply the proposed test to study how soon a variance change can be detected for the yen/$ exchange rate and the S&P 500 stock index.

AB - In this paper we propose the MOSUM of squares test for monitoring potential variance changes when new observations arrive. It is shown that the limiting distribution of the proposed test is determined by the increments of the Brownian bridge. Finite-sample simulations examine empirical sizes and average detection delays of the proposed test. We apply the proposed test to study how soon a variance change can be detected for the yen/$ exchange rate and the S&P 500 stock index.

KW - Currency crisis

KW - Monitoring structural change

KW - MOSUM of squares test

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ER -

The MOSUM of squares test for monitoring variance changes

Abstract

Keywords

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