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A momentum-threshold autoregressive unit root test with increased power

  • Cook, Steven
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    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.

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    Article provided by Elsevier in its journal Statistics & Probability Letters.

    Volume (Year): 67 (2004)
    Issue (Month): 4 (May)
    Pages: 307-310

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    Handle: RePEc:eee:stapro:v:67:y:2004:i:4:p:307-310
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    1. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
    2. 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.
    3. 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 559-71, November.
    4. Cook, Steven, 2003. "Modified unit root tests and momentum threshold autoregressive processes," Statistics & Probability Letters, Elsevier, vol. 64(1), pages 83-88, August.
    5. Enders, Walter & Granger, C. W. J., 1998. "Unit Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Staff General Research Papers 1388, Iowa State University, Department of Economics.
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