I've applied the Gauss code for Hatemi-J cointegration test with two structural breaks. May I know how can I identify the break date based on the result that I obtain below.
******* Modified ADF Test ***********
t-statistic = -7.975
AR lag = 0.000
first break point(ADF) = 0.265
second break point(ADF) = 0.441
******** Modified Phillips Test ********
Zt = -8.035
First breakpoint(Zt) = 0.265
Second breakpoint(Zt) = 0.441
Za = -66.572
First breakpoint(Za) = 0.265
Second breakpoint(Za) = 0.441
The Gauss code for the test is as follows:
/* CItest2b */
/* This Gauss module implements tests for cointegration with two
unknown structural breaks as suggested by Hatemi-J (2008, Empirical Economics). The module provides also the cointegration vector with the breaks.
For critical values see the published paper. */
load z[obs,var] =b22.txt; /* Where obs is the number of your observations,
var is the number of your variables, and
b22 is your data file saved in text format.*/
/*z=ln(z);*/
y = z[1:obs,1];
x = z[1:obs,2:var];
obs = rows(y);
n = obs;
call main(y,x,4,2,12);
end;
/*************************************************************************
---- PROC MAIN
----FORMAT: call main(y,x,model,choice,k)
----INPUT: y - depend variable
x - data matrix for independent variables (first row is
first observation)
model - choice for model =2 C
=3 C/T
=4 C/S
choice - only in ADF test, =1 pre-specified AR lag
=2 AIC-chosen AR lag
=3 BIC-chosen AR lag
=4 downward-t-chosen AR lag
k - maximum lag for ADF test
----OUTPUT: print automatically Za*, breakpoint for Za*, Zt*, breakpoint for Zt*
, ADF*, breakpoint for ADF* and AR lag chosen for ADF*
----GLOBAL VARIABLES: none
----EXTERNAL PROCEDURES: adf, phillips
----NB: Constant included in regression
************************************************************************/
/*
**************** Main procedure *******************
*/
proc(0)=main(y,x,model,choice,k);
local t1,t2,n,final1,final2,begin,tstat,x1,lag,j,dummy1,dummy2,temp1,temp2,temp3,temp4;
local tstatminc,minlag1ind,bpt1,bpt2,breakpta1,breakpta2,zaminc,za,breakptza1,breakptza2,ztminc,zt,breakptzt1,breakptzt2;
local b, e1,sig2,se;
n=rows(y);
begin=round(0.15*n);
final1=round(0.70*n);
final2=round(0.85*n);
temp1=999*ones(final1-begin+1,final2-begin*2+1);
temp2=temp1;
temp3=temp1;
temp4=temp1;
t1=begin;
do while t1<=final1;
t2 = t1 + begin;
do while t2 <= final2;
dummy1=zeros(t1,1)|ones(n-t1,1);
dummy2=zeros(t2,1)|ones(n-t2,1);
@ adjust regressors for different models @
if model==3;
x1=ones(n,1)~dummy1~dummy2~seqa(1,1,n)~x;
elseif model==4;
x1=ones(n,1)~dummy1~dummy2~x~(dummy1).*x~(dummy2).*x;
elseif model==2;
x1=ones(n,1)~dummy1~dummy2~x;
endif;
@ computer ADF for each t @
{temp1[t1-begin+1,t2-begin*2+1],temp2[t1-begin+1,t2-begin*2+1]}=adf(y,x1,k,choice);
@ compute Za or Zt for each t @
{temp3[t1-begin+1,t2-begin*2+1],temp4[t1-begin+1,t2-begin*2+1]}=phillips(y,x1);
t2=t2+1;
endo;
t1 = t1 +1;
endo;
@ ADF test @
tstatminc=minc(temp1);
minlag1ind = minindc(temp1);
tstat = minc(tstatminc);
bpt2 = minindc(tstatminc);
bpt1 = minlag1ind[bpt2];
breakpta1 = (bpt1+begin-1)/n;
breakpta2 = (bpt2+begin-1)/n;
lag=temp2[bpt1,bpt2];
print "******** Modified ADF Test ***********";
print "t-statistic = " tstat;
print "AR lag = " lag;
print "first break point(ADF) = " breakpta1;
print "second break point(ADF) = " breakpta2;
print " ";
@ Phillips test @
format /rd 5,3;
/*"temp3=";;temp3;*/
zaminc=minc(temp3);
minlag1ind = minindc(temp3);
za = minc(zaminc);
bpt2 = minindc(zaminc);
bpt1 = minlag1ind[bpt2];
breakptza1 = (bpt1+begin-1)/n;
breakptza2 = (bpt2+begin-1)/n;
ztminc=minc(temp4);
minlag1ind = minindc(temp4);
zt = minc(ztminc);
bpt2 = minindc(ztminc);
bpt1 = minlag1ind[bpt2];
/*"bpt1=";;bpt1;
"bpt2=";;bpt2;
"begin=";;begin;
"n=";;n;
"rows";;rows(temp3);
"cols";;cols(temp3);
*/
breakptzt1 = (bpt1+begin-1)/n;
breakptzt2 = (bpt2+begin-1)/n;
print "******** Modified Phillips Test ********";
print "Zt = " zt;
print "First breakpoint(Zt) = " breakptzt1;
print "Second breakpoint(Zt) = " breakptzt2;
print "Za = " za;
print "First breakpoint(Za) = " breakptza1;
print "Second breakpoint(Za) = " breakptza2;
print " ";
dummy1=zeros(bpt1+begin-1,1)|ones(n-(bpt1+begin-1),1);
dummy2=zeros(bpt2+begin-1,1)|ones(n-(bpt2+begin-1),1);
@ adjust regressors for different models @
if model==3;
x1=ones(n,1)~dummy1~dummy2~seqa(1,1,n)~x;
elseif model==4;
x1=ones(n,1)~dummy1~dummy2~x~(dummy1).*x~(dummy2).*x;
elseif model==2;
x1=ones(n,1)~dummy1~dummy2~x;
endif;
"if model==3;
x1=ones(n,1)~dummy1~dummy2~seqa(1,1,n)~x;
elseif model==4;
x1=ones(n,1)~dummy1~dummy2~(dummy1).*x~(dummy2).*x;
elseif model==2;
x1=ones(n,1)~dummy1~dummy2~x;";
{b, e1,sig2,se} = estimate(y,x1);
"b,se,t";;b~se~(b./se);
/*dummy1~dummy2;*/
retp;
endp;
@ -------------------------------------------------------------- @
/********************** PROC ADF *****************************
** FORMAT
** { stat,lag } = adf(y,x)
** INPUT
** y - dependent variable
** x - independent variables
** OUTPUT
** stata - ADF statistic
** lag - the lag length
** GLOBAL VARIABLES: none
** EXTERNAL PROCEDURES: estimate
**********************************************************************/
/*
*************** Modified ADF for each breakpoint ********************
*/
proc(2) = adf(y,x,kmax,choice);
local b,m,e,e1,n,n1,sig2,se,xe,yde,j,tstat,de,temp1,temp2;
local lag,k,ic,aic,bic;
@ compute ADF @
n=rows(y);
{b,e,sig2,se}=estimate(y,x);
de=e[2:n]-e[1:n-1]; @ difference of residuals @
ic=0;
k=kmax;
temp1=zeros(kmax+1,1);
temp2=zeros(kmax+1,1);
do while k>=0;
yde=de[1+k:n-1];
n1=rows(yde);
@ set up matrix for independent variable(lagged residuals) @
xe=e[k+1:n-1];
j=1;
do while j <= k;
xe=xe~de[k+1-j:n-1-j];
j=j+1;
endo;
{b,e1,sig2,se}=estimate(yde,xe);
if choice==1; @ K is pre-specified @
temp1[k+1]=-1000; @ set an random negative constant @
temp2[k+1]=b[1]/se[1];
break;
elseif choice==2; @ K is determined by AIC @
aic=ln(e1'e1/n1)+2*(k+2)/n1;
ic=aic;
elseif choice==3; @ K is determined by BIC @
bic=ln(e1'e1/n1)+(k+2)*ln(n1)/n1;
ic=bic;
elseif choice==4; @K is determined by downward t @
if abs(b[k+1]/se[k+1]) >= 1.96 or k==0;
temp1[k+1]=-1000; @ set an random negative constant @
temp2[k+1]=b[1]/se[1];
break;
endif;
endif;
temp1[k+1]=ic;
temp2[k+1]=b[1]/se[1];
k=k-1;
endo;
lag=minindc(temp1);
tstat=temp2[lag];
retp(tstat,lag-1);
endp;
@ ------------------------------------------------------------ @
/********************** PROC PHILLIPS *****************************
** FORMAT
** { za,zt } = phillips(y,x)
** INPUT
** y - dependent variable
** x - independent variables
** OUTPUT
** za - the Phillips test statistic
** zt - the Phillips test statistic
** GLOBAL VARIABLES: none
**********************************************************************/
/*
*************** Modified Za or Zt for each breakpoint ********************
*/
proc(2)=phillips(y,x);
local n,b,e,be,ue,nu,bu,uu,su,a2,bandwidth,m,j;
local c,lemda,gama,w,p,sigma2,s,za,zt;
n=rows(y);
@ OLS regression @
b=y/x;
e=y-x*b;
@ OLS regression on residuals @
be=e[2:n]/e[1:n-1];
ue=e[2:n]-e[1:n-1]*be;
@ calculate bandwidth number @
nu=rows(ue);
bu=ue[2:nu]/ue[1:nu-1];
uu=ue[2:nu]-ue[1:nu-1]*bu;
su=meanc(uu.^2);
a2=(4*bu^2*su/(1-bu)^8)/(su/(1-bu)^4);
bandwidth=1.3221*((a2*nu)^0.2);
m=bandwidth;
j=1;
lemda=0;
do while j<=m;
gama=ue[1:nu-j]'ue[j+1:nu]/nu;
c=j/m;
w=(75/(6*pi*c)^2)*(sin(1.2*pi*c)/(1.2*pi*c)-cos(1.2*pi*c));
lemda=lemda+w*gama;
j=j+1;
endo;
@ calculate Za and Zt for each t @
p=sumc(e[1:n-1].*e[2:n]-lemda)/sumc(e[1:n-1].^2);
za=n*(p-1);
sigma2=2*lemda+ue'ue/nu;
s=sigma2/(e[1:n-1]'e[1:n-1]);
zt=(p-1)/sqrt(s);
retp(za,zt);
endp;
@ ------------------------------------------------------------ @
/********************** PROC ESTIMATE *****************************
** FORMAT
** { b,e,sig2,se } = estimate(y,x)
** INPUT
** y - dependent variable
** x - independent variables
** OUTPUT
** b - OLS estimates
** e - residuals
** sig2 - variance
** se - standard error for coefficients
** GLOBAL VARIABLES: none
** Procedure written by Bruce Hansen
**********************************************************************/
/* ***** ols regression ****** */
proc(4) = estimate(y,x);
local m, b, e, sig2, se;
m=invpd(moment(x,0));
b=m*(x'y);
e=y-x*b;
sig2=(e'e)/(rows(y)-cols(x));
se=sqrt(diag(m)*sig2);
retp(b,e,sig2,se);
endp;
@ ---------------------------------------------------------------- @2 Answers
0
I think that the supplied break points:
******* Modified ADF Test *********** t-statistic = -7.975 AR lag = 0.000 first break point(ADF) = 0.265 second break point(ADF) = 0.441
indicate a percentage of the total number of observations passed in. So, for example if you passed 1000 observations and received the output from above, then your first breakpoint would be at observation 265 and the second breakpoint would be at observation 441.
If we look at the section of code that prints the output, we see that the first breakpoint from the modified ADF test comes from a variable, breakpta1 (See code below).
print "******** Modified ADF Test ***********";
print "t-statistic = " tstat;
print "AR lag = " lag;
print "first break point(ADF) = " breakpta1;
print "second break point(ADF) = " breakpta2;
print " ";Since breakpta1 is created by the statement:
breakpta1 = (bpt1+begin-1)/n;Where: begin is the first observation checked for a break, bpt1 is the index of the most significant test statistic in the data looked at and n is the total number of observations, that is why I think the breakpoint is a percentage index into the total number of observations.
Your Answer
2 Answers
0
I think that the supplied break points:
******* Modified ADF Test *********** t-statistic = -7.975 AR lag = 0.000 first break point(ADF) = 0.265 second break point(ADF) = 0.441
indicate a percentage of the total number of observations passed in. So, for example if you passed 1000 observations and received the output from above, then your first breakpoint would be at observation 265 and the second breakpoint would be at observation 441.
If we look at the section of code that prints the output, we see that the first breakpoint from the modified ADF test comes from a variable, breakpta1 (See code below).
print "******** Modified ADF Test ***********";
print "t-statistic = " tstat;
print "AR lag = " lag;
print "first break point(ADF) = " breakpta1;
print "second break point(ADF) = " breakpta2;
print " ";Since breakpta1 is created by the statement:
breakpta1 = (bpt1+begin-1)/n;Where: begin is the first observation checked for a break, bpt1 is the index of the most significant test statistic in the data looked at and n is the total number of observations, that is why I think the breakpoint is a percentage index into the total number of observations.