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The Effects of Temporal Aggregation and Random Sampling on the Power of the Augmented Dickey Fuller Stationarity Test: A Monte Carlo Study

In: Money, Trade and Finance

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  • Dikaios Tserkezos

    (Neapolis University Paphos)

Abstract

A crucial aspect of empirical research is the stationarity properties of a time series. In this short chapter, we examine the effects of temporal aggregation on the power properties of the Augmented Dickey Fuller (ADF) stationarity test developed by Dickey, D.A. and W.A. Fuller, Journal of the American Statistical Association 74, 427–431, 1979. The conducted Monte Carlo simulation experiments show that the use of temporally aggregated data affects seriously the power of the ADF t-test to detect stationarity.

Suggested Citation

  • Dikaios Tserkezos, 2021. "The Effects of Temporal Aggregation and Random Sampling on the Power of the Augmented Dickey Fuller Stationarity Test: A Monte Carlo Study," Springer Books, in: Ioanna T. Kokores & Pantelis Pantelidis & Theodore Pelagidis & Demetrius Yannelis (ed.), Money, Trade and Finance, chapter 0, pages 223-233, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-73219-6_11
    DOI: 10.1007/978-3-030-73219-6_11
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