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Detecting Location Shifts during Model Selection by Step-Indicator Saturation

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Magdalen College and Institute for New Economic Thinking, Oxford Martin School, Oxford University, Eagle House, Walton Well Road, Oxford OX2 6ED, UK
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Economics Department and Institute for New Economic Thinking, Oxford Martin School, Oxford University, Eagle House, Walton Well Road, Oxford OX2 6ED, UK
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Author to whom correspondence should be addressed.
Academic Editor: Kerry Patterson
Econometrics 2015, 3(2), 240-264; https://doi.org/10.3390/econometrics3020240
Received: 16 February 2015 / Accepted: 26 March 2015 / Published: 14 April 2015
To capture location shifts in the context of model selection, we propose selecting significant step indicators from a saturating set added to the union of all of the candidate variables. The null retention frequency and approximate non-centrality of a selection test are derived using a ‘split-half’ analysis, the simplest specialization of a multiple-path block-search algorithm. Monte Carlo simulations, extended to sequential reduction, confirm the accuracy of nominal significance levels under the null and show retentions when location shifts occur, improving the non-null retention frequency compared to the corresponding impulse-indicator saturation (IIS)-based method and the lasso. View Full-Text
Keywords: structural breaks; model selection; Monte Carlo; indicator saturation; Autometrics structural breaks; model selection; Monte Carlo; indicator saturation; Autometrics
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MDPI and ACS Style

Castle, J.L.; Doornik, J.A.; Hendry, D.F.; Pretis, F. Detecting Location Shifts during Model Selection by Step-Indicator Saturation. Econometrics 2015, 3, 240-264. https://doi.org/10.3390/econometrics3020240

AMA Style

Castle JL, Doornik JA, Hendry DF, Pretis F. Detecting Location Shifts during Model Selection by Step-Indicator Saturation. Econometrics. 2015; 3(2):240-264. https://doi.org/10.3390/econometrics3020240

Chicago/Turabian Style

Castle, Jennifer L., Jurgen A. Doornik, David F. Hendry, and Felix Pretis. 2015. "Detecting Location Shifts during Model Selection by Step-Indicator Saturation" Econometrics 3, no. 2: 240-264. https://doi.org/10.3390/econometrics3020240

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