Change point detection in SCAD-penalized dynamic panel models

We propose a cumulative sum (CUSUM)-based testing procedure to sequentially monitor structural changes in smoothly clipped absolute deviation (SCAD)-penalized dynamic panel models. Initially, this approach uses historical panel data to simultaneously perform variable selection and estimation with the SCAD penalty function. Tests based on CUSUM statistics are conducted to identify any change points in subsequent monitoring data. The consistency of the method and the oracle property of the resulting regularized estimators are examined. The asymptotic properties of the test statistics are established under both the null and alternative hypotheses. Simulations are conducted to demonstrate the performance of the proposed method. Finally, a real data application is provided to illustrate the detection procedure.