Testing for a Unit Root in the Presence of a Jump Diffusion Process with GARCH Errors
AbstractThe use of GARCH and jump models to capture asset price dynamics is ubiquitous in economics and finance literature. We show that the size of Breitung (2002) nonparametric unit root test is robust to the presence of jump and GARCH errors but not for the other standard unit root tests. The power performance of all tests, except for Phillips (1987) test, is fairly robust provided that the mean process is not nearly integrated.
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 Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2006n28.
Length: 12 pages
Date of creation: Nov 2006
Date of revision:
Contact details of provider:
Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/
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.:
- Ball, Clifford A. & Torous, Walter N., 1983. "A Simplified Jump Process for Common Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(01), pages 53-65, March.
- Peter C.B. Phillips, 1985.
"Time Series Regression with a Unit Root,"
Cowles Foundation Discussion Papers
740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
- repec:aah:aarhec:1992-8 is not listed on IDEAS
- Gallant, A. Ronald & Hsieh, David & Tauchen, George, 1995.
"Estimation of Stochastic Volatility Models with Diagnostics,"
95-36, Duke University, Department of Economics.
- Gallant, A. Ronald & Hsieh, David & Tauchen, George, 1997. "Estimation of stochastic volatility models with diagnostics," Journal of Econometrics, Elsevier, vol. 81(1), pages 159-192, November.
- Das, Sanjiv R., 2002. "The surprise element: jumps in interest rates," Journal of Econometrics, Elsevier, vol. 106(1), pages 27-65, January.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Kim, Kiwhan & Schmidt, Peter, 1993. "Unit root tests with conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 59(3), pages 287-300, October.
- Breitung, Jorg, 2002. "Nonparametric tests for unit roots and cointegration," Journal of Econometrics, Elsevier, vol. 108(2), pages 343-363, June.
- Knittel, Christopher R. & Roberts, Michael R., 2005. "An empirical examination of restructured electricity prices," Energy Economics, Elsevier, vol. 27(5), pages 791-817, September.
- Chan, Wing H & Maheu, John M, 2002. "Conditional Jump Dynamics in Stock Market Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 377-89, July.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Vlaar, Peter J G & Palm, Franz C, 1993. "The Message in Weekly Exchange Rates in the European Monetary System: Mean Reversion, Conditional Heteroscedasticity, and Jumps," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 351-60, July.
- Philippe Jorion, 1988. "On Jump Processes in the Foreign Exchange and Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 427-445.
- repec:ner:maastr:urn:nbn:nl:ui:27-5754 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jenny Chen).
If references are entirely missing, you can add them using this form.