Bandwidth Selection, Prewhitening, and the Power of the Phillips-Perron Test

Yin-Wong Cheung and Kon S. Lai

Econometric Theory, 1997, vol. 13, issue 05, pages 679-691

Abstract: This study examines several important practical issues concerning nonparametric estimation of the innovation variance for the Phillips-Perron (PP) test. A Monte Carlo study is conducted to evaluate the potential effects of kernel choice, databased bandwidth selection, and prewhitening on the power property of the PP test in finite samples. The Monte Carlo results are instructive. Although the kernel choice is found to make little difference, data-based bandwidth selection and prewhitening can lead to power gains for the PP test. The combined use of both the Andrews (1991, Ecpnometrica 59, 817 966) prewhitening procedure performs particularly well. With the combined use of these two procedures, the PPtest displays relatively good power in comparison with the augmented Dickey-Fuller test.

Date: 1997
View citations in EconPapers

Downloads: (external link)
http://journals.cambridge.org/abstract_S0266466600006137 link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cup:etheor:v:13:y:1997:i:05:p:679-691_00

Access Statistics for this article

More articles in Econometric Theory from Cambridge University Press
Address: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Series data maintained by Mike Eden ().