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Tests For Unit Roots: A Monte Carlo Investigation

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  • G. William Schwert

Abstract

Recent work by Said and Dickey (1984 ,1985) , Phillips (1987), and Phillips and Perron(1988) examines tests for unit roots in the autoregressive part of mixed autoregressive-integrated-moving average (ARIHA) models (tests for stationarity). Monte Carlo experiments show that these unit root tests have different finite sample distributions than the unit root tests developed by Fuller(1976) and Dickey and Fuller (1979, l981) for autoregressive processes. In particular, the tests developed by Philllps (1987) and Phillips and Perron (1988) seem more sensitive to model misspeciflcation than the high order autoregressive approximation suggested by Said and Diekey(1984).

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  • G. William Schwert, 1988. "Tests For Unit Roots: A Monte Carlo Investigation," NBER Technical Working Papers 0073, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberte:0073 Note: ME
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    1. Brainard, William C. & Shoven, John B., 1980. "The financial valuation of the return to capital," Proceedings, Federal Reserve Bank of San Francisco, pages 43-104.
    2. William C. Brainard & John B. Shoven & Laurence Weiss, 1980. "The Financial Valuation of the Return to Capital," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 453-512.
    3. Mason, Carl & Quigley, John M., 1989. "Explicit Models of Willingness to Pay: A Monte Carlo Simulation," Department of Economics, Working Paper Series qt20s601dc, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    4. Hall, Bronwyn H. & Hayashi, Fumio, 1989. "Research and Development as an Investment," Department of Economics, Working Paper Series qt8br8d266, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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