Bootstrap and Fast Double Bootstrap Tests of Cointegration Rank with Financial Time Series
The likelihood ratio test of cointegration rank is the most widely used test for cointegration. Many studies have shown that its finite sample distribution is not well approximated by the limiting distribution. The article introduces and evaluates by Monte Carlo simulation experiments bootstrap and fast double bootstrap (FDB) algorithms for the likelihood ratio test. It finds that the performance of the bootstrap test is very good. The more sophisticated FDB produces a further improvement in cases where the performance of the asymptotic test is very unsatisfactory and the ordinary bootstrap does not work as well as it might. Furthermore, the Monte Carlo simulations provide a number of guidelines on when the bootstrap and FDB tests can be expected to work well. Finally, the tests are applied to US interest rates and international stock prices series. It is found that the asymptotic test tends to overestimate the cointegration rank, while the bootstrap and FDB tests choose the correct cointegration rank.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||14 Sep 2006|
|Note:||This paper is published as: Ahlgren, Niklas and Antell, Jan (2008), 'Bootstrap and Fast Double Bootstrap Tests of Cointegration Rank with Financial Time Series', Computational Statistics and Data Analysis, 52, 4754-4767.|
|Contact details of provider:|| Postal: Hanken School of Economics, Arkadiankatu 22, P.O.B. 479; FIN 00101 Helsinki, Finland|
Phone: +358-9-431 331
Fax: +358-9-431 33 333
Web page: http://www.hanken.fi
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999.
"Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 14(5), pages 563-577, Sept.-Oct.
- Mackinnon, J.G. & Haug, A.A. & Michelis, L., 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," G.R.E.Q.A.M. 96a09, Universite Aix-Marseille III.
- James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Working Papers 1996_07, York University, Department of Economics.
- Ruiz, Esther & Pascual, Lorenzo, 2002. " Bootstrapping Financial Time Series," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 271-300, July.
- van Giersbergen, Noud P A, 1996. "Bootstrapping the Trace Statistic in VAR Models: Monte Carlo Results and Applications," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 391-408, May.
- Doornik, Jurgen A & Hendry, David F & Nielsen, Bent, 1998. " Inference in Cointegrating Models: UK M1 Revisited," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 533-572, December.
- Jurgen A. Doornik & David F. Hendry & Bent Nielsen, 1998. "Inference in Cointegrating Models: UK M1 Revisited," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 533-572, December.
- Bent Nielsen, 2004. "On the Distribution of Likelihood Ratio Test Statistics for Cointegration Rank," Econometric Reviews, Taylor & Francis Journals, vol. 23(1), pages 1-23.
- Paparoditis, Efstathios & Politis, Dimitris N., 2005. "Bootstrapping Unit Root Tests for Autoregressive Time Series," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 545-553, June.
- Pieter Omtzigt & Stefano Fachin, 2006. "The Size and Power of Bootstrap and Bartlett-Corrected Tests of Hypotheses on the Cointegrating Vectors," Econometric Reviews, Taylor & Francis Journals, vol. 25(1), pages 41-60.
- Davidson, Russell & MacKinnon, James G., 2007. "Improving the reliability of bootstrap tests with the fast double bootstrap," Computational Statistics & Data Analysis, Elsevier, vol. 51(7), pages 3259-3281, April.
- Russell Davidson & James G. MacKinnon, 2006. "Improving the Reliability of Bootstrap Tests with the Fast Double Bootstrap," Working Papers 1044, Queen's University, Department of Economics.
- Russell Davidson & James Mackinnon, 2006. "Improving the reliability of bootstrap tests with the fast double bootstrap," Working Papers halshs-00439247, HAL.
- Russell Davidson & James MacKinnon, 2000. "Bootstrap tests: how many bootstraps?," Econometric Reviews, Taylor & Francis Journals, vol. 19(1), pages 55-68.
- Russell Davidson & James G. MacKinnon, 2001. "Bootstrap Tests: How Many Bootstraps?," Working Papers 1036, Queen's University, Department of Economics.
- Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-126, February.
- Anders Rygh Swensen, 2006. "Bootstrap Algorithms for Testing and Determining the Cointegration Rank in VAR Models -super-1," Econometrica, Econometric Society, vol. 74(6), pages 1699-1714, November.
- Hansen, Bruce E, 1994. "Autoregressive Conditional Density Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 705-730, August.
- Hansen, B.E., 1992. "Autoregressive Conditional Density Estimation," RCER Working Papers 322, University of Rochester - Center for Economic Research (RCER).
- Tom Doan, "undated". "RATS programs to replicate Hansen's GARCH models with time-varying t-densities," Statistical Software Components RTZ00086, Boston College Department of Economics.
- Kasa, Kenneth, 1992. "Common stochastic trends in international stock markets," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 95-124, February.
- Davidson, Russell & MacKinnon, James G., 2006. "The power of bootstrap and asymptotic tests," Journal of Econometrics, Elsevier, vol. 133(2), pages 421-441, August.
- Russell Davidson & James G. MacKinnon, 2004. "The Power of Bootstrap and Asymptotic Tests," Working Papers 1035, Queen's University, Department of Economics.
- Niklas Ahlgren & Jan Antell, 2002. "Testing for cointegration between international stock prices," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 851-861.
- Soren Johansen, 2002. "A Small Sample Correction for the Test of Cointegrating Rank in the Vector Autoregressive Model," Econometrica, Econometric Society, vol. 70(5), pages 1929-1961, September.
- Harris, R. I. D. & Judge, G., 1998. "Small sample testing for cointegration using the bootstrap approach," Economics Letters, Elsevier, vol. 58(1), pages 31-37, January.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679, April. Full references (including those not matched with items on IDEAS)