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A momentum-threshold autoregressive unit root test with increased power

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  • Cook, Steven

Abstract

Recent research has shown the momentum-threshold autoregressive (MTAR) unit root test of Enders and Granger (J. Business Econom. Statist. 16 (1998) 304) to exhibit less power than modified Dickey-Fuller tests when applied to MTAR processes. In this paper a revised MTAR test is proposed which employs local-to-unity detrending. The newly proposed test is shown to possess greater power than both the original MTAR test and modified Dickey-Fuller tests over a range of MTAR processes.

Suggested Citation

  • Cook, Steven, 2004. "A momentum-threshold autoregressive unit root test with increased power," Statistics & Probability Letters, Elsevier, vol. 67(4), pages 307-310, May.
  • Handle: RePEc:eee:stapro:v:67:y:2004:i:4:p:307-310
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    References listed on IDEAS

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    1. 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.
    2. Leybourne, S J, 1995. "Testing for Unit Roots Using Forward and Reverse Dickey-Fuller Regressions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 559-571, November.
    3. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
    4. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
    5. Cook, Steven, 2003. "Modified unit root tests and momentum threshold autoregressive processes," Statistics & Probability Letters, Elsevier, vol. 64(1), pages 83-88, August.
    6. 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.
    7. George Kapetanios & Yongcheol Shin, 2002. "GLS Detrending for Nonlinear Unit Root Tests," Working Papers 472, Queen Mary University of London, School of Economics and Finance.
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    Cited by:

    1. Cook, Steven, 2007. "A threshold cointegration test with increased power," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 73(6), pages 386-392.
    2. Atanu Ghoshray and Tatiana Trifonova, 2014. "Dynamic Adjustment of Crude Oil Price Spreads," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).

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