The option fmt() specifies the format and is required if a datelist is used. For example breakpoints(2010Q1), fmt(tq) specifies a break in Quarter 1 in 2010. For example breakpoints(10,index) specifies that the one break occurs at the 10th observation in time. If a numlist is used, option index is required. Known breakpoints can be set by either the number of observation or by the value of the time identifier. Options Options Optionīreakpoints(numlist\datelist ) Critical values can be found in Bai & Perron (1998, 2003) and are supplied by xtbreak test. The F(s+1\s) test is integrated in xtbreak test with the options breaks(#) hypothesis(3). The test is essentially comparing the SSR of the model with s breaks to the minimum of the SSR of the model with s+1 breaks. The F-Statistic for the test with s breaksį(s+1\s) = sup(s=1.,s+1) sup(s0.s.,s1) supF(s,q) 2.1 Testing known breakpointsĪssume that the numbers of breaks and their occurence is known.
#SEQUENTIAL TESTING SERIES#
Xtbreak will automatically determine whether a time series or panel dataset is used. Fixed effects in panel data models cannot have a break. In this case sigma0(s) is a constant with a structural break. In pure time series model breaks in the constant (or deterministics) are possible. sigma0(s), sigma1(s) are the coefficients with structural breaks and T1,…,Ts are the periods of the breakpoints. x(i,t) is a NTxp matrix with variables without a break. Where s is the number of the segment/breaks, z(i,t) is a NT1xq matrix containing the variables whose relationship with y breaks. Xtbreak test implements the tests for structural breaks discussed in Bai & Perron (1998, 2003), Karavias, Narayan, Westerlund (2021) and Ditzen, Karavias, Westerlund (2021).įor the remainder we assume the following model: The last hypothesis tests the null of s breaks against the alternative of one Hypothesis is no breaks against a lower and upper limit of breaks. The first is no break against the alternative of s breaks, the second Unknown breaks, xtbreak test implements three different hypothesises. In the case of a known breakpoint xtbreak test can test if the break occurs at a specific point in time.
The number and period of occurrence of structuralīreaks can be known and unknown.
Xtbreak test implements multiple tests for structural breaks in time series and panel data models. Examples are seasonal dummies or other observed common factors such as asset returns and oil prices. Known factors, which are constant across the cross-sectional dimension but are affected by structural breaks. Variables without breaks used to calculate cross-sectional averages Variables with breaks used to calculate cross-sectional averages Suppresses fixed effects (only for panel data sets)Īdds cross-section averages of variables with and without breaks. Sequential F-Test to obtain number of breaks Options for testing with unknown breakdates and hypothesis(3) options4 Use weighted test statistic instead of unweighted Options for testing with unknown breakdates and hypothesis(2) options3 General Options options1Ĭovariance matrix estimator, allowed: ssr, hac, hc and np Hypothesis(1\2\3) specifies which hypothesis to test, see hypothesises. Hypothesis(1|2|3) breaks(#) options1 options2 options3 options4 options5
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