Title: Scale-invariant CUSUM-based ratio tests for parameter constancy: Application to variance stability
Authors: Paulo Rodrigues - Universidade Nova de Lisboa (Portugal) [presenting]
Abstract: New CUSUM based tests for parameter constancy are introduced following a class of ratio tests recently proposed, which are based on a Karhunen-Loeve expansion. Theoretical results are presented and an in-depth Monte Carlo analysis is performed to evaluate the finite sample performance of the procedure. A comparison with available approaches is provided. The new tests present superior finite sample size properties and interesting power behaviour. An empirical application to the Bitcoin Coindesk index is also included.