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The size performance of a nonparametric unit root test under a variance shift

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  • Maki, Daiki

Abstract

This paper examines the size performance of Breitung's [2002. Nonparametric tests for unit roots and cointegration. J. Econometrics 108, 343-363.] nonparametric unit root test in the presence of a variance shift. We show that the limiting distribution of the test statistic in the presence of a variance shift depends on the break point of the variance and the ratio of the prebreak to the postbreak variance, as in the case of the standard Dickey-Fuller test. However, our Monte Carlo simulations provide clear evidence that Breitung's nonparametric unit root test achieves a far superior size performance as compared with the Dickey-Fuller test.

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  • Maki, Daiki, 2008. "The size performance of a nonparametric unit root test under a variance shift," Statistics & Probability Letters, Elsevier, vol. 78(6), pages 743-748, April.
    • Handle: RePEc:eee:stapro:v:78:y:2008:i:6:p:743-748
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    1. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    2. 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.
    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. Busetti, Fabio & Taylor, A M Robert, 2003. "Variance Shifts, Structural Breaks, and Stationarity Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(4), pages 510-531, October.
    5. Cavaliere, Giuseppe, 2004. "Testing stationarity under a permanent variance shift," Economics Letters, Elsevier, vol. 82(3), pages 403-408, March.
    6. Breitung, Jorg, 2002. "Nonparametric tests for unit roots and cointegration," Journal of Econometrics, Elsevier, vol. 108(2), pages 343-363, June.
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    Cited by:

    1. Daiki Maki, 2015. "Wild bootstrap tests for unit root in ESTAR models," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 24(3), pages 475-490, September.

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