Small Sample Adjustment for Hypotheses Testing on Cointegrating Vectors

Alessandra Canepa

Department of Economics and Statistics Cognetti de Martiis. Working Papers from University of Turin

Abstract: Johansen (2000) Bartlett correction factor for the LR test of linear restrictions on cointegrated vectors is derived under the i.i.d. Gaussian assumption for the innovation terms. However, the distribution of most data relating to financial variables are fat-tailed and often skewed, there is therefore a need to examine small sample inference procedures that require weaker assumptions for the innovation term. This paper suggests that using a non-parametric bootstrap to approximate a Bartlett-type correction provides a statistic that does not require specification of the innovation distribution and can be used by applied econometricians to perform a small sample inference procedure that is less computationally demanding than estimating the p-value of the observed statistic.

Pages: pages 38
Date: 2021-03
New Economics Papers: this item is included in nep-ecm
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Journal Article: Small Sample Adjustment for Hypotheses Testing on Cointegrating Vectors (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:uto:dipeco:202108

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