Finite sample of the Durbin-Watson test against fractionally integrated disturbances
We consider the finite sample power of various tests against serial correlation in the disturbances of a linear regression when these disturbances follow a stationary long memory process. It emerges that the power depends on the form of the regressor matrix and that, for the Durbin-Watson test and many other tests that can be written as ratios of quadratic forms in the disturbances, the power can drop to zero for certain regressors. We also provide a means to detect this zero-power trap. Our results depend solely on the correlation structure and allow for fairly arbitrary nonlinearities.
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- Kleiber, Christian, 2000.
"Finite sample efficiency of OLS in linear regression models with long-memory disturbances,"
2000,34, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
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