SEARCH

SEARCH BY CITATION

Keywords:

  • Brownian bridge;
  • fluctuation test;
  • GMM estimation;
  • spatial dependence;
  • stock returns

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.