2023/06/05 by Kurozumi, Eiji, Skrobotov, Anton
#Econometrics (econ.EM) #FOS: Economics and business
paper · doi:10.48550/arxiv.2306.02977
In this study, we consider a four-regime bubble model under the assumption of time-varying volatility and propose the algorithm of estimating the break dates with volatility correction: First, we estimate the emerging date of the explosive bubble, its collapsing date, and the recovering date to the normal market under assumption of homoskedasticity; second, we collect the residuals and then employ the WLS-based estimation of the bubble dates. We demonstrate by Monte Carlo simulations that the accuracy of the break dates estimators improve significantly by this two-step procedure in some cases compared to those based on the OLS method.