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Deterministic exponential heteroskedasticity, a weakly stationary unit-root process and a useful diagnostic test

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  • Dimitrios Vougas

Abstract

A specific form of deterministic exponential heteroskedasticity is examined. A non-trivial unit root process which has exponentially heteroskedastic innovation and as a consequence, a variance that vanishes asymptotically is detailed. Such a unit root stochastic process, with exponential heteroskedasticity, may be perceived as weakly stationary by the usual unit root tests. In view of the importance of deterministic exponential heteroskedasticity, a new general diagnostic test for detecting the presence of deterministic exponential heteroskedasticity is developed.

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  • Dimitrios Vougas, 2001. "Deterministic exponential heteroskedasticity, a weakly stationary unit-root process and a useful diagnostic test," Applied Economics Letters, Taylor & Francis Journals, vol. 8(6), pages 427-430.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:6:p:427-430
    DOI: 10.1080/135048501750237919
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    1. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
    2. Kim, Kiwhan & Schmidt, Peter, 1993. "Unit root tests with conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 59(3), pages 287-300, October.
    3. Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
    4. King, Maxwell L. & Wu, Ping X., 1991. "Small-disturbance asymptotics and the Durbin-Watson and related tests in the dynamic regression model," Journal of Econometrics, Elsevier, vol. 47(1), pages 145-152, January.
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