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Examination of Some More Powerful Modifications of the Dickey–Fuller Test

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  • Stephen Leybourne
  • Tae‐Hwan Kim
  • Paul Newbold

Abstract

. Although the t‐ratio variant of the Dickey–Fuller test is the most commonly applied unit‐root test in practical applications, it has been known for some time that readily implementable, more powerful modifications are available. We explore the large‐sample properties of five of these modified tests, and the small‐sample properties of these five plus six hybrids. As a result of this study we recommend two particular test procedures.

Suggested Citation

  • Stephen Leybourne & Tae‐Hwan Kim & Paul Newbold, 2005. "Examination of Some More Powerful Modifications of the Dickey–Fuller Test," Journal of Time Series Analysis, Wiley Blackwell, vol. 26(3), pages 355-369, May.
    • Handle: RePEc:bla:jtsera:v:26:y:2005:i:3:p:355-369
    DOI: 10.1111/j.1467-9892.2004.00406.x
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    1. Dong Wan Shin & Beong Soo So, 2001. "recursive Mean Adjustment for Unit Root Tests," Journal of Time Series Analysis, Wiley Blackwell, vol. 22(5), pages 595-612, September.
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    5. Elliott, Graham, 1999. "Efficient Tests for a Unit Root When the Initial Observation Is Drawn from Its Unconditional Distribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 767-783, August.
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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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