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Finite sample of the Durbin-Watson test against fractionally integrated disturbances

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  • Kleiber, Christian
  • Krämer, Walter

Abstract

We consider the finite sample power of various tests against serial correlation in the disturbances of a linear regression when these disturbances follow a stationary long memory process. 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 for certain regressors. We also provide a means to detect this zero-power trap. Our results depend solely on the correlation structure and allow for fairly arbitrary nonlinearities. --

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Bibliographic Info

Paper provided by Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen in its series Technical Reports with number 2004,15.

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Date of creation: 2004
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Handle: RePEc:zbw:sfb475:200415

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Related research

Keywords: Durbin-Watson test; power; autocorrelation; long memory;

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References

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  1. Nabeya, Seiji & Tanaka, Katsuto, 1990. "Limiting power of unit-root tests in time-series regression," Journal of Econometrics, Elsevier, vol. 46(3), pages 247-271, December.
  2. W. Tsay, 1998. "On the power of durbin-watson statistic against fractionally integrated processes," Econometric Reviews, Taylor & Francis Journals, vol. 17(4), pages 361-386.
  3. Bartels, Robert, 1992. "On the power function of the Durbin-Watson test," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 101-112.
  4. Kleiber, Christian, 2000. "Finite sample efficiency of OLS in linear regression models with long-memory disturbances," Technical Reports 2000,34, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
  5. Hisamatsu, Hiroyuki & Maekawa, Koichi, 1994. "The distribution of the Durbin-Watson statistic in integrated and near-integrated models," Journal of Econometrics, Elsevier, vol. 61(2), pages 367-382, April.
  6. King, Maxwell L. & Evans, Merran A., 1988. "Locally Optimal Properties of the Durbin-Watson Test," Econometric Theory, Cambridge University Press, vol. 4(03), pages 509-516, December.
  7. Kramer, Walter & Zeisel, Helmut, 1990. "Finite sample power of linear regression autocorrelation tests," Journal of Econometrics, Elsevier, vol. 43(3), pages 363-372, March.
  8. Kramer, W., 1985. "The power of the Durbin-Watson test for regressions without an intercept," Journal of Econometrics, Elsevier, vol. 28(3), pages 363-370, June.
  9. King, M. L., 1981. "The alternative Durbin-Watson test : An assessment of Durbin and Watson's choice of test statistic," Journal of Econometrics, Elsevier, vol. 17(1), pages 51-66, September.
  10. Nakamura, Shisei & Taniguchi, Masanobu, 1999. "Asymptotic Theory For The Durbin Watson Statistic Under Long-Memory Dependence," Econometric Theory, Cambridge University Press, vol. 15(06), pages 847-866, December.
  11. King, Maxwell L., 1985. "A point optimal test for autoregressive disturbances," Journal of Econometrics, Elsevier, vol. 27(1), pages 21-37, January.
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Cited by:
  1. 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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