F versus t tests for unit roots
F tests which test jointly for a unit root and a zero intercept, and so compete against Dickey-Fuller t tests, are shown not to enhance power because they are invariant to the intercept value in the absence of a unit root. Monte Carlo results in the literature that indicate otherwise are shown to have resulted from the use of special starting values. Testing procedures that employ these F tests to enhance power should be revised.
Volume (Year): 3 (2001)
Issue (Month): 3 ()
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- Ayat, Leila & Burridge, Peter, 2000.
"Unit root tests in the presence of uncertainty about the non-stochastic trend,"
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Cahiers de recherche
8650, Universite de Montreal, Departement de sciences economiques.
- Perron, Pierre, 1988. "Trends and random walks in macroeconomic time series : Further evidence from a new approach," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 297-332.
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