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Confidence Intervals for Autoregressive Coefficients Near One

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Author Info
Graham Elliott (UCSD)
JAMES STOCK (Harvard University)

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Abstract

Often we are interested in the largest root of an autoregressive process. Available methods rely on inverting t-tests to obtain confidence intervals. However, for large autoregressive roots, t-tests do not approximate asymptotically uniformly most powerful tests and do not have optimality properties when inverted for confidence intervals. We exploit the relationship between the power of tests and accuracy of confidence intervals, and suggest methods which are asymptotically more accurate than available interval construction methods. One interval, based on inverting the P(T) or Q(T) statistic, has good asymptotic accuracy and is easy to compute.

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File URL: http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1161&context=ucsdecon
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Publisher Info
Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number 2000-19.

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Date of creation: 01 Jul 2000
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Handle: RePEc:cdl:ucsdec:2000-19

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Related research
Keywords: unit root confidence intervals point optimal tests

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References listed on IDEAS
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.:
  1. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Sargan, John Denis & Bhargava, Alok, 1983. "Testing Residuals from Least Squares Regression for Being Generated by the Gaussian Random Walk," Econometrica, Econometric Society, vol. 51(1), pages 153-74, January. [Downloadable!] (restricted)
  3. Elliott, Graham, 1999. "Efficient Tests for a Unit Root When the Initial Observation Is Drawn from Its Unconditional Distribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 767-83, August.
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