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A momentum-threshold autoregressive unit root test with increased power

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  • Cook, Steven
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    Abstract

    Recent research has shown the momentum-threshold autoregressive (MTAR) unit root test of Enders and Granger (J. Business Econom. Statist. 16 (1998) 304) to exhibit less power than modified Dickey-Fuller tests when applied to MTAR processes. In this paper a revised MTAR test is proposed which employs local-to-unity detrending. The newly proposed test is shown to possess greater power than both the original MTAR test and modified Dickey-Fuller tests over a range of MTAR processes.

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    Bibliographic Info

    Article provided by Elsevier in its journal Statistics & Probability Letters.

    Volume (Year): 67 (2004)
    Issue (Month): 4 (May)
    Pages: 307-310

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    Handle: RePEc:eee:stapro:v:67:y:2004:i:4:p:307-310

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    Related research

    Keywords: Unit root tests Local-to-unity detrending Momentum-threshold autoregression;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
    2. Leybourne, S J, 1995. "Testing for Unit Roots Using Forward and Reverse Dickey-Fuller Regressions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 559-71, November.
    3. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-11, July.
    4. Cook, Steven, 2003. "Modified unit root tests and momentum threshold autoregressive processes," Statistics & Probability Letters, Elsevier, vol. 64(1), pages 83-88, August.
    5. George Kapetanios & Yongcheol Shin, 2002. "GLS Detrending for Nonlinear Unit Root Tests," Working Papers 472, Queen Mary, University of London, School of Economics and Finance.
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    Cited by:
    1. Cook, Steven, 2007. "A threshold cointegration test with increased power," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 73(6), pages 386-392.

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