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Range unit root tests

Author

Listed:
  • García, Ana
  • Aparicio, Felipe M.
  • Escribano, Álvaro

Abstract

Since the seminal paper by Dickey and Fuller in 1979, unit-root tests have conditioned the standard approaches to analyse time series with strong serial dependence, the focus being placed in the detection of eventual unit roots in an autorregresive model fitted to the series. In this paper we propose a completely different method to test for the type of "long-wave" patterns observed not only in unit root time series but also in series following more complex data generating mechanism. To this end, our testing device analyses the trend exhibit by the data, without imposing any constraint on the generating mechanism. We call our device the Range Unit Root (RUR) Test since it is constructed from running ranges of the series. These statistics allow a more general characterization of a strong serial dependence in the mean behavior, thus endowing our test with a number of desirable properties. Among these properties are the invariance to nonlinear monotonic transformations of the series and the robustness to the presence of level shifts and additive outliers. In addition, the RUR test outperforms the power of standard unit root tests on near-unit-root stationary time series.

Suggested Citation

  • García, Ana & Aparicio, Felipe M. & Escribano, Álvaro, 2003. "Range unit root tests," DES - Working Papers. Statistics and Econometrics. WS ws031126, Universidad Carlos III de Madrid. Departamento de Estadística.
  • Handle: RePEc:cte:wsrepe:ws031126
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    References listed on IDEAS

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    Cited by:

    1. García, Ana & Aparicio, Felipe M. & Escribano, Álvaro, 2004. "A range unit root test," DES - Working Papers. Statistics and Econometrics. WS ws041104, Universidad Carlos III de Madrid. Departamento de Estadística.
    2. Aparicio, Felipe M. & Escribano, Álvaro, 2003. "Cointegration tests based on record counting statistics," DES - Working Papers. Statistics and Econometrics. WS ws036615, Universidad Carlos III de Madrid. Departamento de Estadística.

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