The Size and Power of Bootstrap Tests for Linear Restrictions in Misspecified Cointegrating Relationships
AbstractThis paper considers computer intensive methods for inference on cointegrating vectors in maximum likelihood analysis. It investigates the robustness of LR , Wald tests and an F-type test for linear restrictions on cointegrating space to misspecification on the number of cointegrating relations. In addition, since all the distributional results within the maximum likelihood cointegration model rely on asymptotic considerations, it is important to consider the sensitivity of inference procedures to the sample size. In this paper we use bootstrap hypothesis testing as a way to improve inference for linear restriction on the cointegrating space. We find that the resampling procedure is a very useful device for tests that lack the invariance property such as the Wald test, where the size distortion of the bootstrap test converges to zero even for a sample size T=50. Moreover, it turns out that when the number of cointegrating vectors are correctly specified the bootstrap succeeds where the asymptotic approximation is not satisfactory, that is, for a sample size T
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1807.
Date of creation: 01 Aug 2000
Date of revision:
Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
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.:
- O'Brien, R. J., 1996. "The curious case of spurious cointegration," Discussion Paper Series In Economics And Econometrics 9638, Economics Division, School of Social Sciences, University of Southampton.
- Lafontaine, Francine & White, Kenneth J., 1986. "Obtaining any Wald statistic you want," Economics Letters, Elsevier, Elsevier, vol. 21(1), pages 35-40.
- Andrade, I.C. & O'Brien, R. & Podivinsky, J.M., 1994. "Cointegration tests and mean shifts," Discussion Paper Series In Economics And Econometrics 9405, Economics Division, School of Social Sciences, University of Southampton.
- Mackinnon, J-G, 1997.
"The Size and Power of Bootstrap Tests,"
ASSET - Instituto De Economia Publica, ASSET (Association of Southern European Economic Theorists)
153, ASSET (Association of Southern European Economic Theorists).
- Davidson, R. & Mackinnon, J.G., 1996. "The Size and Power of Bootstrap Tests," G.R.E.Q.A.M., Universite Aix-Marseille III 96a03, Universite Aix-Marseille III.
- Russell Davidson & James G. MacKinnon, 1996. "The Size and Power of Bootstrap Tests," Working Papers, Queen's University, Department of Economics 932, Queen's University, Department of Economics.
- Gregory, Allan W & Veall, Michael R, 1985. "Formulating Wald Tests of Nonlinear Restrictions," Econometrica, Econometric Society, Econometric Society, vol. 53(6), pages 1465-68, November.
- Bent Nielsen, . "On the distribution of tests of cointegration rank," Economics Papers 1997-W10, Economics Group, Nuffield College, University of Oxford.
- Li, Hongyi & Maddala, G. S., 1997.
"Bootstrapping cointegrating regressions,"
Journal of Econometrics, Elsevier,
Elsevier, vol. 80(2), pages 297-318, October.
- Tom Doan, . "RATS program to demonstrate bootstrapping with cointegration," Statistical Software Components RTZ00021, Boston College Department of Economics.
- Fachin, Stefano, 2000. " Bootstrap and Asymptotic Tests of Long-Run Relationships in Cointegrated Systems," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(4), pages 543-51, September.
- O'Brien, R.J., 1997. "Further curiosa in 'spurious' cointegration," Discussion Paper Series In Economics And Econometrics 9704, Economics Division, School of Social Sciences, University of Southampton.
- Johansen, S., 1999.
"A Small Sample Correction for Tests of Hypotheses on the Cointegrating Vectors,"
Economics Working Papers, European University Institute
eco99/9, European University Institute.
- Johansen, Soren, 2002. "A small sample correction for tests of hypotheses on the cointegrating vectors," Journal of Econometrics, Elsevier, Elsevier, vol. 111(2), pages 195-221, December.
- Joel L. Horowitz, 1996. "Bootstrap Methods in Econometrics: Theory and Numerical Performance," Econometrics, EconWPA 9602009, EconWPA, revised 05 Mar 1996.
- Podivinsky, Jan M., 1998. "Testing misspecified cointegrating relationships," Economics Letters, Elsevier, Elsevier, vol. 60(1), pages 1-9, July.
- Horowitz, Joel L., 1994. "Bootstrap-based critical values for the information matrix test," Journal of Econometrics, Elsevier, Elsevier, vol. 61(2), pages 395-411, April.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 12(2-3), pages 231-254.
- Harris, R I D, 1992. "Small Sample Testing for Unit Roots," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(4), pages 615-25, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.