Preprint Article Version 1 NOT YET PEER-REVIEWED

Change Point Estimation in Panel Data without Boundary Issue

Version 1 : Received: 30 November 2016 / Approved: 1 December 2016 / Online: 1 December 2016 (10:02:03 CET)

A peer-reviewed article of this Preprint also exists.

Peštová, B.; Pešta, M. Change Point Estimation in Panel Data without Boundary Issue. Risks 2017, 5, 7. Peštová, B.; Pešta, M. Change Point Estimation in Panel Data without Boundary Issue. Risks 2017, 5, 7.

Journal reference: Risks 2017, 5, 7
DOI: 10.3390/risks5010007

Abstract

Panel data of our interest consist of a moderate number of panels, while the panels contain a small number of observations. An estimator of common breaks in panel means without a boundary issue for this kind of scenario is proposed. In particular, the novel estimator is able to detect a common break point even when the change happens immediately after the first time point or just before the last observation period. Another advantage of the elaborated change point estimator is that it results in the last observation in situations with no structural breaks. The consistency of the change point estimator in panel data is established. The results are illustrated through a simulation study. As a by-product of the developed estimation technique, a theoretical utilization for correlation structure estimation, hypothesis testing, and bootstrapping in panel data is demonstrated. A practical application to non-life insurance is presented as well.

Subject Areas

change point; estimation; consistency; panel data; short panels; boundary issue; structural change; bootstrap; non-life insurance; change in claim amounts

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