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A Modified ADF Test for Geometric ARMA Processes

Author

Listed:
  • Fathali Firoozi

    (Department of Economics, University of Texas at San Antonio, U.S.A.)

  • Donald Lien

    (Department of Economics, University of Texas at San Antonio, U.S.A.)

Abstract

This study first shows that geometric processes arise naturally and then proposes a modification to the standard augmented Dickey-Fuller (ADF) equation for testing unit root non-stationarity in geometric ARMA (r,q) processes with q?1 . The proposed test equation removes the order truncation bias that is inherent in the standard ADF test equation for such processes.

Suggested Citation

  • Fathali Firoozi & Donald Lien, 2016. "A Modified ADF Test for Geometric ARMA Processes," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 15(2), pages 173-179, December.
    • Handle: RePEc:ijb:journl:v:15:y:2016:i:2:p:173-179
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    References listed on IDEAS

    as
    1. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February.
    2. Zhije Xiao & Peter C.B. Phillips, 1998. "An ADF coefficient test for a unit root in ARMA models of unknown order with empirical applications to the US economy," Econometrics Journal, Royal Economic Society, vol. 1(RegularPa), pages 27-43.
    3. Enders, Walter & Lee, Junsoo, 2012. "The flexible Fourier form and Dickey–Fuller type unit root tests," Economics Letters, Elsevier, vol. 117(1), pages 196-199.
    4. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    5. Harvey, David I. & Leybourne, Stephen J. & Taylor, A.M. Robert, 2009. "Unit Root Testing In Practice: Dealing With Uncertainty Over The Trend And Initial Condition," Econometric Theory, Cambridge University Press, vol. 25(3), pages 587-636, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    autoregressive moving average processes; order approximation; infinite order;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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