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A unified framework for testing in the linear regression model under unknown order of fractional integration

  • Christensen, Bent Jesper
  • Kruse, Robinson
  • Sibbertsen, Philipp

We consider hypothesis testing in a general linear time series regression framework when the possibly fractional order of integration of the error term is unknown. We show that the approach suggested by Vogelsang (1998a) for the case of integer integration does not apply to the case of fractional integration. We propose a Lagrange Multiplier-type test whose limiting distribution is independent of the order of integration of the errors. Different testing scenarios for the case of deterministic and stochastic regressors are considered. Simulations demonstrate that the proposed test works well for a variety of different cases, thereby emphasizing its generality.

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Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-519.

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Length: 33 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:han:dpaper:dp-519
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  8. Bent Jesper Christensen & Morten Ø. Nielsen, . "Semiparametric Analysis of Stationary Fractional Cointegration and the Implied-Realized Volatility Relation in High-Frequency Options Data," Economics Working Papers 2001-4, School of Economics and Management, University of Aarhus.
  9. Pierre Perron & Tomoyoshi Yabu, 2005. "Testing for Shifts in Trend with an Integrated or Stationary Noise Component," Boston University - Department of Economics - Working Papers Series WP2005-026, Boston University - Department of Economics.
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