strucchange breakpoints (Bai and Perron, 1998, 2003)
On Sun, 26 Feb 2012, buehlerman wrote:
If I try the breakpoints() function (strucchange package) with a minimum segment size = the number of regressors, there appears the following error message: "minimum segment size must be greater than the number of regressors" According to the documentation: "breakpoints implements the algorithm described in Bai & Perron (2003) for simultaneous estimation of multiple breakpoints." Bai & Perron (2003) assumed: minimum segment size >= number of regressors (and not >). What is the reason for this deviation?
It was introduced to make the results numerically more stable. Typically, neither of the restrictions will be appropriate in practice and larger minimal segment sizes should be used. For example, for a regression with an intercept and a slope, I would typically use at least h = 10 (and not h = 2 or h = 3) so that the parameters estimators are meaningful on each resulting segment.
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