This paper investigates two problems which a practitioner of Johansen's cointegration analysis faces: the pre-testing problem and the inconsistency problem. Johansen's cointegration analysis requires hypothesis testing at four stages, and thus Type I errors accumulate. In addition, it often...

A new method for detecting regime switches between different probability distributions in financial time series is shown. In the proposed method, time series observations are divided into several segments, and a Gaussian model or a Cauchy model is fitted to each segment. The goodness of fit of...

An information criterion-based model selection method is proposed for monitoring unit root and multiple structural changes. In this method, a battery of possible models is considered by changing the integration order (I(0) or I(1)) and the combinations of change points. Next, the best model is...