On the Size Distortion from Linearly Interpolating Low-frequency Series for Cointegration Tests

Eric Ghysels and J. Miller

No 1403, Working Papers from Department of Economics, University of Missouri

Abstract: We analyze the sizes of standard cointegration tests applied to data subject to linear interpolation, discovering evidence of substantial size distortions induced by the interpolation. We propose modifications to these tests to effectively eliminate size distortion from such tests conducted on data interpolated from end-of-period sampled low-frequency series. Our results generally do not support linear interpolation when alternatives such as aggregation or mixed-frequency-modified tests are possible.

Keywords: linear interpolation; cointegration; trace test; residual-based cointegration tests (search for similar items in EconPapers)
JEL-codes: C12 C32 (search for similar items in EconPapers)
Pages: 24 pgs.
Date: 2014-01-15
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (8)

Published in Advances in Econometrics 2014

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Chapter: On the Size Distortion from Linearly Interpolating Low-frequency Series for Cointegration Tests (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1403

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