The Level and Power of the Bootstrap t Test in the AR(1) Model with Trend

John C Nankervis and N E Savin

Journal of Business & Economic Statistics, 1996, vol. 14, issue 2, 161-68

Abstract: This paper considers a first-order autoregressive model which may include an intercept and trend where the innovations are independently and identically distributed. The innovation distribution is assumed unknown. The autoregressive parameter is tested using the conventional t statistic. The paper presents Monte Carlo estimates of the rejection probability of the test with bootstrap-based critical values. The results show that the test with the bootstrap-based critical value has essentially the right rejection probability for sample sizes comparable to or smaller than those which occur in practice and essentially the same power as the test with level-corrected critical values.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:14:y:1996:i:2:p:161-68

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