CUSUM‐type testing for changing parameters in a spatial autoregressive model for stock returns

The article suggests a CUSUM‐type test for time‐varying parameters in a recently proposed spatial autoregressive model for stock returns and derives its asymptotic null distribution as well as local power properties. As can be seen from Euro Stoxx 50 returns, a combination of spatial modelling and change point tests might allow for superior risk forecasts in portfolio management.