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Stationarity Tests for Irregularly Spaced Observations and the Effects of Sampling Frequency on Power


  • Robert Taylor
  • Fabio Busetti


In this paper, starting from continuous-time local level unobserved components models for stock and flow data we derive locally best invariant (LBI) stationarity tests for data available at potentially irregularly spaced points in time. We demonstrate that the form of the LBI test differs between stock and flow variables. In cases where the data are observed at regular intervals throughout the sample we show that the LBI tests for stock and flow data both reduce to the form of the standard stationarity test in the discrete-time local level model. Here we also show that the asymptotic local power of the LBI test increases with the sampling frequency in the case of stock, but not flow, variables. Moreover, for a fixed time span we show that the LBI test for stock (flow) variables is (is not) consistent against a fixed alternative as the sampling frequency increases to infinity. We also consider the case of mixed frequency data in some detail, providing asymptotic critical values for the LBI tests for both stock and flow variables, together with a finite sample power study. Our results suggest that tests which ignore the infra-period aspect of the data involve rather small losses in efficiency relative to the LBI test in the case of flow variables, but can result in significant losses of efficiency when analysing stock variables.

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  • Robert Taylor & Fabio Busetti, 2004. "Stationarity Tests for Irregularly Spaced Observations and the Effects of Sampling Frequency on Power," Econometric Society 2004 Far Eastern Meetings 494, Econometric Society.
  • Handle: RePEc:ecm:feam04:494

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    References listed on IDEAS

    1. Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, pages 201-226.
    2. Stewart, Douglas B, 1976. "Can Trade Widen the Difference between Factor Rewards? Another Look at the More-Goods-Than-Factors Case," American Economic Review, American Economic Association, vol. 66(4), pages 671-674, September.
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    More about this item


    Stock and flow variables; local level model; unit root; LBI test; temporal aggregation;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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