Properties of Recursive Trend-Adjusted Unit Root Tests
In this paper, we analyse the properties of recursive trend adjusted unit root tests. We show that OLS based recursive trend adjustment can produce unit root tests which are not invariant when the data is generated from a random walk with drift and investigate whether the power performance previously observed in the literature is maintained under invariant versions of the tests. A finite sample evaluation of the size and power of the invariant procedures is presented.
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