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Robust Tests Of The Unit Root Hypothesis Should Not Be

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  • Thompson, Samuel B.
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    Abstract

    The rank-based unit root tests proposed by Hasan and Koenker (1997, Econometrica 65, 133 161) have power equal to size for normal innovations. Unit root tests based on M-estimators exhibit the same behavior. The problem occurs because the test statistics are transformed to obtain computationally convenient critical values. I describe a convenient way to compute critical values without transforming the test statistics. The resulting tests are almost as powerful as least squares based tests for normal errors and much more powerful for thicker tailed distributions.

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    Bibliographic Info

    Article provided by Cambridge University Press in its journal Econometric Theory.

    Volume (Year): 20 (2004)
    Issue (Month): 02 (April)
    Pages: 360-381

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    Handle: RePEc:cup:etheor:v:20:y:2004:i:02:p:360-381_20

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    Cited by:
    1. Marc Hallin & Ramon van den Akker & Bas J.M. Werker, 2011. "A class of simple distribution-free rank-based unit root tests," Post-Print peer-00834424, HAL.
    2. Michael Jansson, 2007. "Semiparametric Power Envelopes for Tests of the Unit Root Hypothesis," CREATES Research Papers 2007-12, School of Economics and Management, University of Aarhus.
    3. Amélie Charles & Olivier Darné, 2010. "A note on the uncertain trend in US real GNP: Evidence from robust unit root test," Working Papers hal-00547737, HAL.
    4. Uwe Hassler & Paulo M.M. Rodrigues & Antonio Rubia, 2012. "Quantile regression for long memory testing: A case of realized volatility," Working Papers w201207, Banco de Portugal, Economics and Research Department.
    5. Galvao Jr., Antonio F., 2009. "Unit root quantile autoregression testing using covariates," Journal of Econometrics, Elsevier, vol. 152(2), pages 165-178, October.
    6. Marc Hallin & Ramon van den Akker & Bas Werker, 2009. "A class of Simple Semiparametrically Efficient Rank-Based Unit Root Tests," Working Papers ECARES 2009_001, ULB -- Universite Libre de Bruxelles.

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