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Efficient Tests for an Autoregressive Unit Root

Listed author(s):
  • Elliott, Graham
  • Rothenberg, Thomas J
  • Stock, James H

The asymptotic power envelope is derived for point-optimal tests of a unit root in the autoregressive representation of a Gaussian time series. The authors propose a family of tests whose asymptotic power functions are tangent to the power envelope at one point and are never far below. When the series has an unknown mean or linear trend, commonly used tests are found to be dominated by members of the family of point-optimal invariant tests. The authors propose a modified version of the Dickey-Fuller t test which has desirable size properties and substantially improved power when an unknown mean or trend is present. Copyright 1996 by The Econometric Society.

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Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 64 (1996)
Issue (Month): 4 (July)
Pages: 813-836

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Handle: RePEc:ecm:emetrp:v:64:y:1996:i:4:p:813-36
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  1. Pierre Perron & Serena Ng, 1996. "Useful Modifications to some Unit Root Tests with Dependent Errors and their Local Asymptotic Properties," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 435-463.
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  27. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
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