Tests for an end-of-sample bubble in financial time series
In this paper we examine the issue of detecting explosive behaviour in economic and financial time series when an explosive episode is both ongoing at the end of the sample, and of finite length. We propose a testing strategy based on the sub-sampling method of Andrews (2003), in which a suitable te...
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| Format: | Article |
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Taylor & Francis
2017
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| Online Access: | https://eprints.nottingham.ac.uk/37775/ |
| _version_ | 1848795531298471936 |
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| author | Astill, Sam Harvey, David I. Leybourne, Stephen J. Taylor, Robert |
| author_facet | Astill, Sam Harvey, David I. Leybourne, Stephen J. Taylor, Robert |
| author_sort | Astill, Sam |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | In this paper we examine the issue of detecting explosive behaviour in economic and financial time series when an explosive episode is both ongoing at the end of the sample, and of finite length. We propose a testing strategy based on the sub-sampling method of Andrews (2003), in which a suitable test statistic is calculated on a finite number of end-of-sample observations, with a critical value obtained using sub-sample test statistics calculated on the remaining observations. This approach also has the practical advantage that, by virtue of how the critical values are obtained, it can deliver tests which are robust to, among other things, conditional heteroskedasticity and serial correlation in the driving shocks. We also explore modifications of the raw statistics to account for unconditional heteroskedasticity using studentisation and a White-type correction. We evaluate the finite sample size and power properties of our proposed procedures, and find that they offer promising levels of power, suggesting the possibility for earlier detection of end-of-sample bubble episodes compared to existing procedures. |
| first_indexed | 2025-11-14T19:33:34Z |
| format | Article |
| id | nottingham-37775 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:33:34Z |
| publishDate | 2017 |
| publisher | Taylor & Francis |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-377752020-05-04T18:38:44Z https://eprints.nottingham.ac.uk/37775/ Tests for an end-of-sample bubble in financial time series Astill, Sam Harvey, David I. Leybourne, Stephen J. Taylor, Robert In this paper we examine the issue of detecting explosive behaviour in economic and financial time series when an explosive episode is both ongoing at the end of the sample, and of finite length. We propose a testing strategy based on the sub-sampling method of Andrews (2003), in which a suitable test statistic is calculated on a finite number of end-of-sample observations, with a critical value obtained using sub-sample test statistics calculated on the remaining observations. This approach also has the practical advantage that, by virtue of how the critical values are obtained, it can deliver tests which are robust to, among other things, conditional heteroskedasticity and serial correlation in the driving shocks. We also explore modifications of the raw statistics to account for unconditional heteroskedasticity using studentisation and a White-type correction. We evaluate the finite sample size and power properties of our proposed procedures, and find that they offer promising levels of power, suggesting the possibility for earlier detection of end-of-sample bubble episodes compared to existing procedures. Taylor & Francis 2017-03-22 Article PeerReviewed Astill, Sam, Harvey, David I., Leybourne, Stephen J. and Taylor, Robert (2017) Tests for an end-of-sample bubble in financial time series. Econometric Reviews, 36 (6-9). pp. 651-666. ISSN 1532-4168 Rational bubble; Explosive autoregression; Right-tailed unit root testing: Sub-sampling http://www.tandfonline.com/doi/abs/10.1080/07474938.2017.1307490 doi:10.1080/07474938.2017.1307490 doi:10.1080/07474938.2017.1307490 |
| spellingShingle | Rational bubble; Explosive autoregression; Right-tailed unit root testing: Sub-sampling Astill, Sam Harvey, David I. Leybourne, Stephen J. Taylor, Robert Tests for an end-of-sample bubble in financial time series |
| title | Tests for an end-of-sample bubble in financial time series |
| title_full | Tests for an end-of-sample bubble in financial time series |
| title_fullStr | Tests for an end-of-sample bubble in financial time series |
| title_full_unstemmed | Tests for an end-of-sample bubble in financial time series |
| title_short | Tests for an end-of-sample bubble in financial time series |
| title_sort | tests for an end-of-sample bubble in financial time series |
| topic | Rational bubble; Explosive autoregression; Right-tailed unit root testing: Sub-sampling |
| url | https://eprints.nottingham.ac.uk/37775/ https://eprints.nottingham.ac.uk/37775/ https://eprints.nottingham.ac.uk/37775/ |