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F versus t tests for unit roots

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  • Peter E. Kennedy

    ()
    (Simon Fraser University)

  • John Elder

    ()
    (North Dakota State University)

Abstract

F tests which test jointly for a unit root and a zero intercept, and so compete against Dickey-Fuller t tests, are shown not to enhance power because they are invariant to the intercept value in the absence of a unit root. Monte Carlo results in the literature that indicate otherwise are shown to have resulted from the use of special starting values. Testing procedures that employ these F tests to enhance power should be revised.

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File URL: http://www.accessecon.com/pubs/EB/2001/Volume3/EB-01C10001A.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2001)
Issue (Month): 3 ()
Pages: 1-6

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Handle: RePEc:ebl:ecbull:eb-01c10001

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Related research

Keywords: Dickey-Fuller;

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References

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  1. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 1057-72, June.
  2. Perron, Pierre, 1988. "Trends and random walks in macroeconomic time series : Further evidence from a new approach," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 12(2-3), pages 297-332.
  3. Ayat, Leila & Burridge, Peter, 2000. "Unit root tests in the presence of uncertainty about the non-stochastic trend," Journal of Econometrics, Elsevier, Elsevier, vol. 95(1), pages 71-96, March.
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Cited by:
  1. repec:ebl:ecbull:v:3:y:2004:i:37:p:1-6 is not listed on IDEAS
  2. Don Bredin & John Elder & Stilianos Fountas, 2010. "Oil Volatility and the Option Value of Waiting: An analysis of the G-7," Discussion Paper Series 2010_05, Department of Economics, University of Macedonia, revised Apr 2010.
  3. Fuerst, Michael E., 2006. "Investor risk premia and real macroeconomic fluctuations," Journal of Macroeconomics, Elsevier, Elsevier, vol. 28(3), pages 540-563, September.
  4. repec:ebl:ecbull:v:3:y:2004:i:12:p:1-7 is not listed on IDEAS
  5. Elder, John & Serletis, Apostolos, 2009. "Oil price uncertainty in Canada," Energy Economics, Elsevier, Elsevier, vol. 31(6), pages 852-856, November.
  6. Peter E. Kennedy & John Elder, 2004. "More on F versus t tests for unit roots when there is no trend," Economics Bulletin, AccessEcon, vol. 3(37), pages 1-6.

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