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

Author

Listed:
  • Hallin, M.
  • Werker, B.J.M.

    (Tilburg University, Center For Economic Research)

  • van den Akker, R.

    (Tilburg University, Center For Economic Research)

Abstract

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.

Suggested Citation

  • Hallin, M. & Werker, B.J.M. & van den Akker, R., 2015. "Optimal Pseudo-Gaussian and Rank-based Tests of the Cointegration Rank in Semiparametric Error-correction Models," Discussion Paper 2015-001, Tilburg University, Center for Economic Research.
  • Handle: RePEc:tiu:tiucen:d1b040c9-db57-4e55-846f-44e7cc614771
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cointegration model; Cointegration rank; Elliptical densities; erro-correction model; Lagrange multiplier test; Local Asymptotic Brownian Functional; Local Asymptotic Mixed Normality; Local Asymptotic Normality; Multivariate ranks; quasi-likelihood procedures;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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