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Unit root quantile autoregression testing with smooth structural changes

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  • Li, Haiqi
  • Zheng, Chaowen

Abstract

By incorporating the flexible Fourier form into quantile autoregression model, this paper proposes three new unit root test statistics, which are robust to both non-Gaussian condition and structural changes. Since their limiting distributions are non-standard, a bootstrap procedure is developed to calculate their critical values. Monte Carlo simulation results show that, while Koenker and Xiao (2004) tests are quite conservative under various kinds of error distributions and structural changes, the newly proposed tests have good size performance except for a little size distortion occasionally. Moreover, our tests have much higher performance especially when the sample size is small.

Suggested Citation

  • Li, Haiqi & Zheng, Chaowen, 2018. "Unit root quantile autoregression testing with smooth structural changes," Finance Research Letters, Elsevier, vol. 25(C), pages 83-89.
    • Handle: RePEc:eee:finlet:v:25:y:2018:i:c:p:83-89
    DOI: 10.1016/j.frl.2017.10.008
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    References listed on IDEAS

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    Cited by:

    1. Nazlioglu, Saban & Kucukkaplan, Ilhan & Kilic, Emre & Altuntas, Mehmet, 2022. "Financial market integration of emerging markets: Heavy tails, structural shifts, nonlinearity, and asymmetric persistence," Research in International Business and Finance, Elsevier, vol. 62(C).
    2. Kilic, Emre & Yavuz, Ersin & Pazarci, Sevket & Kar, Asim, 2023. "Analyzing the efficient market hypothesis with asymmetric persistence in cryptocurrencies: Insights from the Fourier non-linear quantile unit root approach," Finance Research Letters, Elsevier, vol. 58(PC).
    3. Yang, Jisheng & Wei, Jinbao & Cai, Biqing, 2022. "Quantile unit root inference for panel data with common shocks," Economics Letters, Elsevier, vol. 219(C).

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    More about this item

    Keywords

    Unit root test; Quantile autoregression; Flexible fourier form; Structural changes;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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