A simple method for testing cointegration subject to regime changes

In this paper, we propose a simple method for testing cointegration in models that allow for multiple shifts in the long run relationship. The procedure consists of computing conventional residual-based tests with standardized residuals from Markov switching estimation. No new critical values are needed. An empirical application to the present value model of stock prices is presented, complemented by a small Monte Carlo experiment.

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Year of publication:	2001
Authors:	Gabriel, Vasco J. ; Sola, Martin ; Psaradakis, Zacharias
Institutions:	Núcleo de Investigação em Políticas Económicas (NIPE), Universidade do Minho
Subject:	Cointegration \| Markov Switching \| Standardized residuals

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Extent:	application/pdf
Series:	NIPE Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 15/2001
Classification:	C12 - Hypothesis Testing ; C22 - Time-Series Models ; C52 - Model Evaluation and Testing
Source:	RePEc - Research Papers in Economics

Persistent link: https://ebvufind01.dmz1.zbw.eu/10005572465