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Frequency Domain Tests for Residual Serial Correlation in Cointegration Regressions

In Choi () and Nelson Mark ()

Oxford Bulletin of Economics and Statistics, 1997, vol. 59, issue 4, 549-62

Abstract: This paper introduces tests for residual serial correlation in cointegrating regressions. The tests are devised in the frequency domain by using the spectral measure estimates. The asymptotic distributions of the tests are derived and test consistency is established. The asymptotic distributions are obtained by using the assumptions and methods that are different from those used in Granander and Rosenbaltt (1957) and Durlauf (1991). Small-scale simulation results are reported to illustrate the finite sample performance of the tests under the various distributional assumptions on the data generating process. The distributions considered are normal and t-distributions. The tests are shown to have stable size at sample sizes as large as 50 or 100. Additionally, it is shown that the tests are reasonably powerful against the ARMA residuals. An empirical applications of the tests to investigate the 'weak-form' efficiency in the foreign exchange market is also reported. Copyright 1997 by Blackwell Publishing Ltd

Date: 1997
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Oxford Bulletin of Economics and Statistics is currently edited by Christopher Adam, Anindya Banerjee, Christopher Bowdler, David Hendry, Adriaan Kalwij, John Knight and Jonathan Temple

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