Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2025-10-24
Number: 25-063/III
Author-Name: Andre Lucas
Author-Workplace-Name: Vrije Universiteit Amsterdam
Author-Name: Yicong Lin
Author-Workplace-Name: Vrije Universiteit Amsterdam
Title: Testing for the Absence of Score-Driven Parameter Dynamics
Abstract: This paper proposes a quasi-likelihood ratio (QLR) test for the null of constant parameters against the alternative of score-driven parameter dynamics. Score-driven models have been widely used in the literature to capture time variation in parameters across a diverse range of both continuous and discrete, univariate and multivariate time series models, with or without random regressors. A formal testing procedure, however, is lacking thus far. Our QLR test addresses two key challenges: (i) parameters may lie on the boundary of the parameter space, and (ii) nuisance parameters are not identified under the null. The test statistic’s non-standard asymptotic distribution takes a simple form that only depends on the specified parameter space and is invariant to the specific formulation of the score-driven model and its degree of nonlinearity. Consequently, the asymptotic distribution applies to a wide range of score-driven models and can easily be simulated to conduct inference. We illustrate the new test using several models from the score-driven literature and show that the limiting distribution provides an adequate approximation for inference in finite samples.
Classification-JEL: C10, C12, C32
Keywords: parameter constancy, score-driven models, quasi-likelihood ratio test, parameters on the boundary, nonidentification
File-URL: https://papers.tinbergen.nl/25063.pdf
File-Format: application/pdf
File-Size: 773.167 bytes
Handle: RePEc:tin:wpaper:20250063