Advanced Search
MyIDEAS: Login to save this paper or follow this series

Stochastic and deterministic unit root models: problem of dominance

Contents:

Author Info

  • Svetlana Makarova
  • Wojciech Charemza

Abstract

The paper considers the question of dominance, in the context of financial markets, of the deterministic unit root processes with a structural break by the bilinear unit root model without such break or vice versa. In the deterministic unit root process breaks are usually interpreted as exogenous, while the unit root bilinearity is mostly attributed to speculation. A series of Monte Carlo experiments show substantial size distortions in testing for the deterministic unit root process in the presence of unit root bilinearity and vice versa. To eliminate this problem, two additional tests are proposed here: one for the joint testing of the process with a structural break and unit root bilinearity, and the other for testing the unit root bilinearity conditional on the break. The asymptotic properties of these tests have been analysed. The tests are applied for the daily stock price indices for 63 countries, for the period 1992-2005. It has been found out that in 34 cases the bilinearity is present in the series, and in only two cases a structural break was discovered without the presence of bilinearity. Since for most of the series a possible break occurs either in 2000 or 2001, it sheds some new light on the reasons for the stock market breakdown at the beginning of the 21st century.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 190.

as in new window
Length:
Date of creation: 11 Nov 2005
Date of revision:
Handle: RePEc:sce:scecf5:190

Contact details of provider:
Email:
Web page: http://comp-econ.org/
More information through EDIRC

Related research

Keywords: REGULAR Unit root bilinearity; nonlinear time series models; structural breaks;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Wojciech Charemza
    by Metablog Obserwatora Finansowego in Obserwator Finansowy on 2009-12-10 11:59:58

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:sce:scecf5:190. See general information about how to correct material in RePEc.

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.