1. Econ 427 lecture 16 slides
Stability Tests
Byron Gangnes

2. Recursive Estimation If our model is:
We estimate it starting with a small sample and increasing the sample length by one period each time. This gives us a time series of each parameter:
Byron Gangnes

3. Recursive Residuals
Can calculate the time series of recursive residuals:
The standard errors of these residuals are not the same at each point (why not?)
Byron Gangnes

4. Standardized recursive resids
Byron Gangnes

5. CUSUM test
Can compare to tabulate values (EViews does)
Byron Gangnes

6. A Model with Constant Params
Byron Gangnes

7. A Model with Non-Constant Params
Byron Gangnes