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On the distribution of Dickey-Fuller unit root statistics when there is a break in the innovation variance

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  • Sen, Amit

Abstract

We show that Dickey & Fuller's [Distribution of the estimator for autoregressive time series with a unit root. J. Amer. Statist. Assoc. 74, 427-431; Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica 49, 1057-1072] normalized estimator and F-statistics for the unit root null hypothesis will spuriously reject the null hypothesis if there is a break in the innovation variance relatively early in the sample.

Suggested Citation

  • Sen, Amit, 2007. "On the distribution of Dickey-Fuller unit root statistics when there is a break in the innovation variance," Statistics & Probability Letters, Elsevier, vol. 77(1), pages 63-68, January.
    • Handle: RePEc:eee:stapro:v:77:y:2007:i:1:p:63-68
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    References listed on IDEAS

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    1. Hamori, Shigeyuki & Tokihisa, Akira, 1997. "Testing for a unit root in the presence of a variance shift1," Economics Letters, Elsevier, vol. 57(3), pages 245-253, December.
    2. Alastair Hall, 1992. "Joint Hypothesis Tests For A Random Walk Based On Instrumental Variable Estimators," Journal of Time Series Analysis, Wiley Blackwell, vol. 13(1), pages 29-45, January.
    3. Kim, Tae-Hwan & Leybourne, Stephen & Newbold, Paul, 2002. "Unit root tests with a break in innovation variance," Journal of Econometrics, Elsevier, vol. 109(2), pages 365-387, August.
    4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
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    Cited by:

    1. Christoph Hanck & Robert Czudaj, 2013. "Nonstationary-Volatility Robust Panel Unit Root Tests and the Great Moderation," Ruhr Economic Papers 0434, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. repec:zbw:rwirep:0434 is not listed on IDEAS
    3. Hanck, Christoph, 2008. "Nonstationary-Volatility Robust Panel Unit Root Tests and the Great Moderation," MPRA Paper 11988, University Library of Munich, Germany.
    4. Kalenga, John Ngoy, 2014. "Mine safety and Industrial accidents at the Générale des Carrières et des Mines, in Katanga, Democratic Republic of Congo," Discussion paper series. A 277, Graduate School of Economics and Business Administration, Hokkaido University.
    5. Hanck, C.H., 2009. "Nonstationary-volatility robust panel unit root tests and the great moderation," Research Memorandum 009, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    6. Costantini, Mauro & Sen, Amit, 2016. "A simple testing procedure for unit root and model specification," Computational Statistics & Data Analysis, Elsevier, vol. 102(C), pages 37-54.
    7. Christoph Hanck & Robert Czudaj, 2015. "Nonstationary-volatility robust panel unit root tests and the great moderation," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 99(2), pages 161-187, April.

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