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Fractional Seasonal Variance Ratio Unit Root Tests

Author

Listed:
  • Burak Eroglu

    (Istanbul Bilgi University)

  • Kemal Caglar Gogebakan

    (Bilkent University)

  • Mirza Trokic

    (Bilkent University and IHS Markit)

Abstract

This paper introduces a non-parametric variance ratio testing procedure for seasonal unit roots by utilizing the fractional integration operator. This procedure includes unit root tests at zero, Nyquist, harmonic and joint frequencies. Different from the widely used seasonal unit root tests of Hylleberg et al. (1990)[HEGY], the proposed tests are free from any nuisance and tuning parameters. Furthermore, we develop a new bootstrap technique for the fractional seasonal variance ratio tests by utilizing wavelet filters. This technique allows the practitioners to test for the seasonal unit roots without estimating a parametric regression model. The Monte Carlo simulation evidence reveals that, our proposed fractional seasonal variance ratio [FSVR] tests and the wavelet based bootstrap counterparts have desirable size and power properties.

Suggested Citation

  • Burak Eroglu & Kemal Caglar Gogebakan & Mirza Trokic, 2017. "Fractional Seasonal Variance Ratio Unit Root Tests," Working Papers 1707, The Center for Financial Studies (CEFIS), Istanbul Bilgi University.
    • Handle: RePEc:bli:wpaper:1707
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    File URL: https://cefis.bilgi.edu.tr/pdf/CEFIS1706.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Seasonal unit roots; Fractional integration; Wavelets; Wavestrapping;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: 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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