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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- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
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