CUSUM-type testing for changing parameters in a spatial autoregressive model for stock returns

Authors


Correspondence to: Fakultät Statistik, CDI-Gebäude, TU Dortmund, 44221 Dortmund, Germany.

Abstract

The article suggests a CUSUM-type test for time-varying parameters in a recently proposed spatial autoregressive model for stock returns and derives its asymptotic null distribution as well as local power properties. As can be seen from Euro Stoxx 50 returns, a combination of spatial modelling and change point tests might allow for superior risk forecasts in portfolio management.

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