Testing the Null of Co-integration in the Presence of Variance Breaks
AbstractWe show that changes in the innovation covariance matrix of a vector of series can generate spurious rejections of the null hypothesis of co-integration when applying standard residual-based co-integration tests. A bootstrap solution to the inference problem is suggested which is shown to perform well in practice, redressing the size problems associated with the standard test but not losing power relative to the standard test under the alternative. Copyright 2006 The Authors Journal compilation 2006 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Time Series Analysis.
Volume (Year): 27 (2006)
Issue (Month): 4 (07)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0143-9782
Other versions of this item:
- Giuseppe Cavaliere and A M Robert Taylor, 2005. "Testing the Null of Co-integration in the Presence of Variance Breaks," Discussion Papers 05-10, Department of Economics, University of Birmingham.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
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- Giuseppe Cavaliere & Anders Rahbek & A. M. Robert Taylor, 2007.
"Testing for co-integration in vector autoregressions with non-stationary volatility,"
07/02, University of Nottingham, Granger Centre for Time Series Econometrics.
- Cavaliere, Giuseppe & Rahbek, Anders & Taylor, A.M. Robert, 2010. "Testing for co-integration in vector autoregressions with non-stationary volatility," Journal of Econometrics, Elsevier, vol. 158(1), pages 7-24, September.
- Giuseppe Cavaliere & Anders Rahbek & A.M.Robert Taylor, 2008. "Testing for Co-integration in Vector Autoregressions with Non-Stationary Volatility," CREATES Research Papers 2008-50, School of Economics and Management, University of Aarhus.
- Giuseppe Cavaliere & Anders Rahbek & A. M. Robert Taylor, 2008. "Testing for Co-integration in Vector Autoregressions with Non-Stationary Volatility," Discussion Papers 08-34, University of Copenhagen. Department of Economics.
- Kourogenis, Nikolaos & Pittis, Nikitas, 2008. "Cointegration, variance shifts and the limiting distribution of the OLS estimator," Economics Letters, Elsevier, vol. 99(1), pages 103-106, April.
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