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Optimal Pseudo-Gaussian and Rank-based Tests of the Cointegration Rank in Semiparametric Error-correction Models

Listed author(s):
  • Hallin, M.
  • Werker, B.J.M.

    (Tilburg University, Center For Economic Research)

  • van den Akker, R.

    (Tilburg University, Center For Economic Research)

This paper provides locally optimal pseudo-Gaussian and rank-based tests for the cointegration rank in linear cointegrated error-correction models with i.i.d. elliptical innovations. The proposed tests are asymptotically distribution-free, hence their validity does not depend on the actual distribution of the innovations. The proposed rank-based tests depend on the choice of scores, associated with a reference density that can freely be chosen. Under appropriate choices they are achieving the semiparametric efficiency bounds; when based on Gaussian scores, they moreover uniformly dominate their pseudo-Gaussian counterparts. Simulations show that the asymptotic analysis provides an accurate approximation to finite-sample behavior. The theoretical results are based on a complete picture of the asymptotic statistical structure of the model under consideration.

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File URL: https://pure.uvt.nl/portal/files/4823408/2015_001.pdf
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2015-001.

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Date of creation: 2015
Handle: RePEc:tiu:tiucen:d1b040c9-db57-4e55-846f-44e7cc614771
Contact details of provider: Web page: http://center.uvt.nl

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