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The Behaviour of Dickey Fuller test in the case of noisy data: to what extent we can trust the outcome

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  • Stephen Hall
  • Sahar S. Qaqeesh

Abstract

We examine the behaviour of Dickey Fuller test (DF) in the case of noisy data using Monte Carlo simulation. The findings show clearly that the size distortion of DF test becomes larger as the noise increases in the data.

Suggested Citation

  • Stephen Hall & Sahar S. Qaqeesh, 2009. "The Behaviour of Dickey Fuller test in the case of noisy data: to what extent we can trust the outcome," Discussion Papers in Economics 09/18, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:09/18
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    File URL: https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp09-18.pdf
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    References listed on IDEAS

    as
    1. Montañés, Antonio & Reyes, Marcelo, 1998. "Effect Of A Shift In The Trend Function On Dickey–Fuller Unit Root Tests," Econometric Theory, Cambridge University Press, vol. 14(3), pages 355-363, June.
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    Cited by:

    1. Onsurang Norrbin & Aaron D. Smallwood, 2011. "Mean Reversion in the Real Interest Rate and the Effects of Calculating Expected Inflation," Southern Economic Journal, John Wiley & Sons, vol. 78(1), pages 107-130, July.

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    More about this item

    Keywords

    Hypothesis testing; Unit root test; Monte Carlo Analysis.;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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