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A NOTE ON SPURIOUS BREAK

Published online by Cambridge University Press:  01 October 1998

Jushan Bai
Jushan Bai
Affiliation:
Massachusetts Institute of Technology
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Abstract

When the disturbances of a regression model follow an I(1) process there is a tendency to estimate a break point in the middle of the sample, even though a break point does not actually exist. In this note, we provide a mathematical proof for this phenomenon.

Type
MISCELLANEA
Information
Econometric Theory , Volume 14 , Issue 5 , October 1998 , pp. 663 - 669
Copyright
© 1998 Cambridge University Press

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