Alternative point-optimal tests for regression coefficient stability

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Abstract

In the context of the linear regression model, Shively (1988) has constructed a point-optimal test for constant coefficients against the alternative of return to normalcy coefficients. This paper considers alternative methods for the choice of values of the unknown parameters required to conduct the test. These alternatives are based on Cox and Hinkley's (1974, p. 102) idea of maximising some weighted average of powers. The paper explores the use of some simple weighting schemes and demonstrates by an empirical power comparison the usefulness of maximising some weighted average of powers in solving this testing problem.

Original languageEnglish
Pages (from-to)365-376
Number of pages12
JournalJournal of Econometrics
Volume57
Issue number1-3
DOIs
Publication statusPublished - 1 Jan 1993
Externally publishedYes

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