IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Bootstrapping the likelihood ratio cointegration test in error correction models with unknown lag order

  • Kascha, Christian
  • Trenkler, Carsten

The finite-sample size and power properties of bootstrapped likelihood ratio system cointegration tests are investigated via Monte Carlo simulations when the true lag order of the data generating process is unknown. Recursive bootstrap schemes are employed which differ in the way in which the lag order is chosen. The order is estimated by minimizing different information criteria and by combining the corresponding order estimates. It is found that, in comparison to the standard asymptotic likelihood ratio test based on an estimated lag order, bootstrapping can lead to improvements in small samples even when the true lag order is unknown, while the power loss is moderate.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Computational Statistics & Data Analysis.

Volume (Year): 55 (2011)
Issue (Month): 2 (February)
Pages: 1008-1017

in new window

Handle: RePEc:eee:csdana:v:55:y:2011:i:2:p:1008-1017
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Palm, Franz C. & Smeekes, Stephan & Urbain, Jean-Pierre, 2010. "A Sieve Bootstrap Test For Cointegration In A Conditional Error Correction Model," Econometric Theory, Cambridge University Press, vol. 26(03), pages 647-681, June.
  2. Doornik, Jurgen A, 1998. " Approximations to the Asymptotic Distributions of Cointegration Tests," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 573-93, December.
  3. Chang, Yoosoon & Park, Joon Y. & Song, Kevin, 2006. "Bootstrapping cointegrating regressions," Journal of Econometrics, Elsevier, vol. 133(2), pages 703-739, August.
  4. Qu, Zhongjun & Perron, Pierre, 2007. "A Modified Information Criterion For Cointegration Tests Based On A Var Approximation," Econometric Theory, Cambridge University Press, vol. 23(04), pages 638-685, August.
  5. Richard Samworth, 2003. "A note on methods of restoring consistency to the bootstrap," Biometrika, Biometrika Trust, vol. 90(4), pages 985-990, December.
  6. Patrick Richard, 2008. "Modified Fast Double Sieve Bootstraps for ADF Tests," Cahiers de recherche 08-17, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  7. Cavaliere, Giuseppe & Rahbek, Anders & Taylor, A.M. Robert, 2010. "Testing for co-integration in vector autoregressions with non-stationary volatility," Journal of Econometrics, Elsevier, vol. 158(1), pages 7-24, September.
  8. Russell Davidson & James Mackinnon, 2006. "Improving the reliability of bootstrap tests with the fast double bootstrap," Working Papers halshs-00439247, HAL.
  9. Bauer, Dietmar & Wagner, Martin, 2005. "Autoregressive Approximations of Multiple Frequency I(1) Processes," Economics Series 174, Institute for Advanced Studies.
  10. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  12. Bauer, Dietmar & Wagner, Martin, 2009. "Using subspace algorithm cointegration analysis: Simulation performance and application to the term structure," Computational Statistics & Data Analysis, Elsevier, vol. 53(6), pages 1954-1973, April.
  13. van Giersbergen, Noud P A, 1996. "Bootstrapping the Trace Statistic in VAR Models: Monte Carlo Results and Applications," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 391-408, May.
  14. Ho, Mun S & Sorensen, Bent E, 1996. "Finding Cointegration Rank in High Dimensional Systems Using the Johansen Test: An Illustration Using Data Based Monte Carlo Simulations," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 726-32, November.
  15. Soren Johansen, 2002. "A Small Sample Correction for the Test of Cointegrating Rank in the Vector Autoregressive Model," Econometrica, Econometric Society, vol. 70(5), pages 1929-1961, September.
  16. Carsten Trenkler, 2006. "Bootstrapping Systems Cointegration Tests with a Prior Adjustment for Deterministic Terms," SFB 649 Discussion Papers SFB649DP2006-012, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  17. Joseph P. Romano & Michael Wolf, 2003. "Stepwise Multiple Testing as Formalized Data Snooping," Working Papers 17, Barcelona Graduate School of Economics.
  18. Kirstin Hubrich & Helmut Lutkepohl & Pentti Saikkonen, 2001. "A Review Of Systems Cointegration Tests," Econometric Reviews, Taylor & Francis Journals, vol. 20(3), pages 247-318.
  19. Boswijk, Peter & Franses, Philip Hans, 1992. "Dynamic Specification and Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 369-81, August.
  20. Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1987. "Stochastic Trends and Economic Fluctuations," NBER Working Papers 2229, National Bureau of Economic Research, Inc.
  21. Pötscher, B.M., 1991. "Effects of Model Selection on Inference," Econometric Theory, Cambridge University Press, vol. 7(02), pages 163-185, June.
  22. Guiseppe Cavaliere & Anders Rahbek & A.M.Robert Taylor, 2010. "Bootstrap Sequential Determination of the Co-integration Rank in VAR Models," CREATES Research Papers 2010-07, Department of Economics and Business Economics, Aarhus University.
  23. Toda, Hiro Y., 1995. "Finite Sample Performance of Likelihood Ratio Tests for Cointegrating Ranks in Vector Autoregressions," Econometric Theory, Cambridge University Press, vol. 11(05), pages 1015-1032, October.
  24. Toda, Hiro Y, 1994. "Finite Sample Properties of Likelihood Ratio Tests for Cointegrating Ranks when Linear Trends are Present," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 66-79, February.
  25. Saikkonen, Pentti & Luukkonen, Ritva, 1997. "Testing cointegration in infinite order vector autoregressive processes," Journal of Econometrics, Elsevier, vol. 81(1), pages 93-126, November.
  26. Leeb, Hannes & P tscher, Benedikt M., 2005. "Model Selection And Inference: Facts And Fiction," Econometric Theory, Cambridge University Press, vol. 21(01), pages 21-59, February.
  27. Ahlgren, N. & Antell, J., 2008. "Bootstrap and fast double bootstrap tests of cointegration rank with financial time series," Computational Statistics & Data Analysis, Elsevier, vol. 52(10), pages 4754-4767, June.
  28. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  29. Anders Rygh Swensen, 2006. "Bootstrap Algorithms for Testing and Determining the Cointegration Rank in VAR Models -super-1," Econometrica, Econometric Society, vol. 74(6), pages 1699-1714, November.
  30. Pötscher, Benedikt M. & Leeb, Hannes, 2007. "On the distribution of penalized maximum likelihood estimators: The LASSO, SCAD, and thresholding," MPRA Paper 5615, University Library of Munich, Germany.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:csdana:v:55:y:2011:i:2:p:1008-1017. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.