For my bachelor thesis I am trying to determine structural stability of some stock market in the following way:
- Identify an ARMA model for the whole sample
- Split the sample in two parts, and estimate the ARMA model of step one on both sub samples.
- Use the F test to determine whether the coefficients in the first sub sample differ from the second.
If they do then the markets are not stable.
But here is my problem. The best ARMA model is a (0,0) model. So there are no coefficient to compare with the F test. As far as I know, this makes this method unusable. Is this correct, and if so, is there another way to test stability of returns?