“GLS based unit root tests for bounded processes”
AbstractWe show that the use of generalized least squares (GLS) detrending procedures leads to important empirical power gains compared to ordinary least squares (OLS) detrend- ing method when testing the null hypothesis of unit root for bounded processes. The non-centrality parameter that is used in the GLS-detrending depends on the bounds, so that improvements on the statistical inference are to be expected if a case-specific parameter is used. This initial hypothesis is supported by the simulation experiment that has been conducted.
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Bibliographic InfoPaper provided by University of Barcelona, Regional Quantitative Analysis Group in its series AQR Working Papers with number 201302.
Length: 16 pages
Date of creation: Apr 2013
Date of revision: Apr 2013
Unit root; bounded process; quasi GLS-detrending. JEL classification: C12; C22;
Other versions of this item:
- 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 &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-20 (All new papers)
- NEP-ECM-2013-04-20 (Econometrics)
- NEP-ETS-2013-04-20 (Econometric Time Series)
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