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Maximizing Equity Market Sector Predictability in a Bayesian Time Varying Parameter Model* - page 34 / 46

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Table 3 Parameter Constancy Tests

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Results are presented for testing the null of parameter constancy using Bai and Perron’s testing procedure. The Wdmax(1%) test denotes the F-statistic for testing the null of no breaks against the alternative of l breaks subject to a pre-specified upper bound in the possible number of breaks (here the upper bound is set to 5). In particular the Wdmax test applies appropriate weights to each F-statistic so that the marginal p-values are equal across values of l. Each of the SupFT(l) statistics tests the null of 0 against l breaks where l=1,2,…,5. The SupFT(l+1|l) statistic tests the null of l breaks (where l is given), against the alternative of one additional structural break. All data are in weekly frequency. The sample period over which the statistics are estimated is January 12, 1990 through January 10, 2003.

Su F (5 4)

T

Su F (4 3)

T

Su F (3 2)

T

Su F (2 1)

T

Su F (5)

T

Su F (4)

T

Su F (3)

T

Su F (2)

T

Su F (1)

T

Wdmax(1%)

58.4531***

10.916

4.486

54.830***

33.683***

23.746***

43.751***

61.824***

48.591***

73.497***

CONS DISCR

14.4506

14.996

14.996

8.474

11.970

13.128

12.441

12.348

17.520*

17.520

CONS STAPLE

8.803

20.539*

11.294

24.729***

19.548***

22.562***

18.993***

20.086**

11.301

26.755***

ENERGY

19.588

24.946**

24.946**

11.617

19.334***

16.916**

14.952*

10.137

31.335***

31.335***

FINANCIALS

9.979

14.701

22.380**

22.765**

19.079***

18.661***

20.383***

18.453**

19.553**

28.359***

HEALTH CARE

15.331

38.229***

4.960

40.131***

44.325***

35.693***

29.727***

40.587***

36.979***

65.883***

INDUSTRIALS

46.827***

28.859***

28.859***

12.047

19.052***

23.409***

22.409***

23.830***

34.267***

34.267***

TECHNOLOGY

23.517**

14.766

26.642***

13.249

25.329***

21.680***

24.536***

19.362**

25.678***

37.648***

MATERIALS

21.027

16.921

16.921

35.182***

25.459***

29.746***

33.348***

31.191***

25.239***

43.981***

TELECOMMS

11.514

31.038***

10.462

57.383***

28.115***

32.993***

33.263***

21.907***

11.529

46.313***

UTILITIES

*, **, ***, reject stability at the 10%, 5%, and 1% asymptotic significance levels respectively.

33

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