IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Spurious Rejections by Dickey-Fuller Tests in the Presence of an Endogenously Determined Break under the Null = Rechazos espurios de los test de Dickey-Fuller en presencia de una ruptura bajo la hipótesis nula endógenamente determinada

  • Badillo Amador, Rosa


    (Departamento de Economía, Universidad Politécnica de Cartagena (España))

  • Belaire Franch, Jorge


    (Departamento de Fundamentos del Análisis Económico, Universidad de Valencia (España))

  • Reverte Maya, Carmelo


    (Departamento de Economía Financiera y Contabilidad, Universidad Politécnica de Cartagena (España))

Leybourne et al. (1998) have proved the possibility of a “converse Perron phenomenon” when conventional Dickey-Fuller tests are applied to determine the order of integration of a time series. That is, if the true generating process is I(1) but with a break, frequent spurious rejections of the null hypothesis can occur. Although Leybourne et al. (1998) suggest it would be appropriate to use procedures in which the break date was treated as endogenous, they consider it as exogenous. Thus, this paper analyses whether their results change when the structural break is identified endogenously, that is, if the break point is gleaned from the data. In this sense, applying a recursive tDF test to a unit root process which has a break in its level, there is no virtually evidence of the `converse Perron phenomenon'. For the rest of the endogeneization procedures (i.e., rolling and sequential) and for the two types of breaks considered (in level or in drift), we find, in line with Leybourne et al. (1998), some distortion in the Dickey-Fuller tDF test size, which depends on the break size, the location of the break point in the sample and the sample size. Leybourne et al. (1998) muestran el cumplimiento del denominado “fenómeno inverso de Perron" cuando se aplican los test convencionales de Dickey-Fuller para determinar el orden de integración de una serie temporal. Este fenómeno consiste en que, si el verdadero proceso generador es I(1) pero con una ruptura, pueden producirse rechazos espurios frecuentes de la hipótesis nula. Aunque Leybourne et al. (1998) sugieren que sería apropiado utilizar procedimientos en los que la ruptura sea tratada como endógena, ellos la consideran como exógena. Así, este trabajo analiza si sus resultados cambian cuando la ruptura estructural se determina endógenamente, es decir, a partir de los datos. En este sentido, aplicando el procedimiento tDF recursivo a un proceso de raíz unitaria con una ruptura en el nivel, no encontramos prácticamente evidencia del “fenómeno inverso de Perron". Para el resto de procedimientos de endogeneización (rolling y secuencial) y para los dos tipos de rupturas considerados (en nivel o en deriva) encontramos, en línea con Leybourne et al. (1998), alguna distorsión en el tamaño del test tDF de Dickey-Fuller, la cual depende de la magnitud de la ruptura, de su ubicación en la muestra y del tamaño de la misma.

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: no

File URL:
Download Restriction: no

Article provided by Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration in its journal Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration.

Volume (Year): 9 (2010)
Issue (Month): 1 (June)
Pages: 3-16

in new window

Handle: RePEc:pab:rmcpee:v:9:y:2010:i:1:p:3-16
Contact details of provider: Postal: Carretera de Utrera km.1, 41013 Sevilla
Phone: + 34 954 34 8913
Fax: + 34 954 34 9339
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

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:pab:rmcpee:v:9:y:2010:i:1:p:3-16. 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: (Publicación Digital - UPO)

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.