Generalized Laplace inference in multiple change-points models
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Citation (published version)Alessandro Casini, Pierre Perron. 2020. "Generalized Laplace inference in multiple change-points models."
Under the classical long-span asymptotic framework we develop a class of Generalized Laplace (GL) inference methods for the change-point dates in a linear time series regression model with multiple structural changes analyzed in, e.g., Bai and Perron (1998). The GL estimator is defined by an integration rather than optimization-based method and relies on the least-squares criterion function. It is interpreted as a classical (non-Bayesian) estimator and the inference methods proposed retain a frequentist interpretation. This approach provides a better approximation about the uncertainty in the data of the change-points relative to existing methods. On the theoretical side, depending on some input (smoothing) parameter, the class of GL estimators exhibits a dual limiting distribution; namely, the classical shrinkage asymptotic distribution, or a Bayes-type asymptotic distribution. We propose an inference method based on Highest Density Regions using the latter distribution. We show that it has attractive theoretical properties not shared by the other popular alternatives, i.e., it is bet-proof. Simulations confirm that these theoretical properties translate to better finite-sample performance.