Finite-Sample Power of the Durbin-Watson Test Against Fractionally Integrated Disturbances
AbstractWe consider the finite-sample power of various tests against serial correlation in the disturbances of a linear regression model when these disturbances follow certain stationary long-memory processes. It emerges that the power depends on the form of the regressor matrix and that, for the Durbin--Watson test and many other tests that can be written as ratios of quadratic forms in the disturbances, the power can drop to zero as the long-memory parameter approaches the boundary of the stationarity region. The problem does not arise when the regression includes an intercept. We also provide a means to detect this zero-power trap for given regressors. Our analytical results are illustrated using fractionally integrated white noise and ARFIMA(1, d, 0) disturbances with artificial regressors and with a real data set. Copyright 2005 Royal Economic Society
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Bibliographic InfoPaper provided by Business and Social Statistics Department, Technische Universität Dortmund in its series Working Papers with number 10.
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Publication status: Published in The Econometrics Journal 8, 2005, pages 406-417
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- Christian Kleiber & Walter Kr�mer, 2005. "Finite-sample power of the Durbin--Watson test against fractionally integrated disturbances," Econometrics Journal, Royal Economic Society, vol. 8(3), pages 406-417, December.
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- Martellosio, Federico, 2008. "Power Properties of Invariant Tests for Spatial Autocorrelation in Linear Regression," MPRA Paper 7255, University Library of Munich, Germany.
- Anurag Banerjee, 2004. "Sensitivity of OLS estimates against ARFIMA error process as small sample Test for long memory," Econometric Society 2004 Australasian Meetings 159, Econometric Society.
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