On KPSS with GARCH errors

Marco Barassi

Economics Bulletin, 2005, vol. 3, issue 55, 1-12

Abstract: In this paper we discuss the finite sample behavior of the KPSS test in the presence of conditionally heteroskedastic errors. We confirm that under stationary GARCH errors the asymptotics of the KPSS remains valid. However, in finite samples we observe a slight size distortion and a power distortion. Interestingly, IGARCH errors do not seem to affect the size of the test, however they may often cause a substantial loss of power.

Keywords: asymptotic; and; finite; sample; properties (search for similar items in EconPapers)
Date: 2005-12-13
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Citations: View citations in EconPapers (3)

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