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On KPSS with GARCH errors

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Author Info
Marco Barassi () (Department of Economics, University of Birmingham)

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Abstract

In this paper we discuss the finite sample behavior of the KPSS test in the presence of conditionally heteroskedastic errors. We confirm that under stationary GARCH errors the asymptotics of the KPSS remains valid. However, in finite samples we observe a slight size distortion and a power distortion. Interestingly, IGARCH errors do not seem to affect the size of the test, however they may often cause a substantial loss of power.

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File URL: http://economicsbulletin.vanderbilt.edu/2005/volume3/EB-05C40003A.pdf
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 3 (2005)
Issue (Month): 55 ()
Pages: 1-12
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Handle: RePEc:ebl:ecbull:v:3:y:2005:i:55:p:1-12

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Related research
Keywords: finite sample properties; GARCH; KPSS test;

Find related papers by JEL classification:
C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

References listed on IDEAS
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  1. Peter C.B. Phillips & Victor Solo, 1989. "Asymptotics for Linear Processes," Cowles Foundation Discussion Papers 932, Cowles Foundation, Yale University. [Downloadable!]
  2. Shiqing Ling & W. K. Li & Michael McAleer, 2003. "Estimation and Testing for Unit Root Processes with GARCH (1, 1) Errors: Theory and Monte Carlo Evidence," CIRJE F-Series CIRJE-F-207, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
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  3. Seo, Byeongseon, 1999. "Distribution theory for unit root tests with conditional heteroskedasticity1," Journal of Econometrics, Elsevier, vol. 91(1), pages 113-144, July. [Downloadable!] (restricted)
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This page was last updated on 2009-12-12.

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