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The performance of the tests of linear and logarithmic transformations for integrated processes with stochastic unit roots

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  • Gawon Yoon

Abstract

This paper shows that the recently proposed tests of linear and logarithmic transformations for integrated processes against each other by Kobayashi and McAleer (1999) are severely biased for alternative hypotheses when the true data generating process is a stochastic unit root. An empirical example with four daily bond yields is also provided

Suggested Citation

  • Gawon Yoon, 2004. "The performance of the tests of linear and logarithmic transformations for integrated processes with stochastic unit roots," Econometric Society 2004 Far Eastern Meetings 728, Econometric Society.
    • Handle: RePEc:ecm:feam04:728
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    File URL: http://repec.org/esFEAM04/up.31606.1080741546.pdf
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    Keywords

    data transformation; (stochastic) unit roots; nonnested tests;
    All these keywords.

    JEL classification:

    • 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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