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A Note on Testing Covariance Stationarity

Author

Listed:
  • Giuseppe Cavaliere
  • A. M. Robert Taylor

Abstract

In a recent article, Xiao and Lima (2007) show numerically that the stationarity test of Kwiatkowski et al. (1992) has power close to size when the volatility of the innovation process follows a linear trend. In this article, highlighting published results in Cavaliere and Taylor (2005), we show that this observation does not in general hold under time-varying volatility. We also propose alternative tests of covariance stationarity which we show to improve upon the power properties of the tests proposed in Xiao and Lima (2007) against changes in the unconditional variance. Practical recommendations are also made.

Suggested Citation

  • Giuseppe Cavaliere & A. M. Robert Taylor, 2009. "A Note on Testing Covariance Stationarity," Econometric Reviews, Taylor & Francis Journals, vol. 28(4), pages 364-371.
    • Handle: RePEc:taf:emetrv:v:28:y:2009:i:4:p:364-371
    DOI: 10.1080/07474930802458992
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    Cited by:

    1. Skrobotov, Anton, 2020. "Survey on structural breaks and unit root tests," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 58, pages 96-141.

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