Efficient Tests for an Autoregressive Unit Root

Graham Elliott (), Thomas J Rothenberg and James H Stock

Econometrica, 1996, vol. 64, issue 4, 813-36

Abstract: The asymptotic power envelope is derived for point-optimal tests of a unit root in the autoregressive representation of a Gaussian time series. The authors propose a family of tests whose asymptotic power functions are tangent to the power envelope at one point and are never far below. When the series has an unknown mean or linear trend, commonly used tests are found to be dominated by members of the family of point-optimal invariant tests. The authors propose a modified version of the Dickey-Fuller t test which has desirable size properties and substantially improved power when an unknown mean or trend is present. Copyright 1996 by The Econometric Society.

Date: 1996
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Related works:
Working Paper: Efficient Tests for an Autoregressive Unit Root (1992)
Software Item: ERSTEST: RATS procedure to perform Elliott-Rothenberg-Stock unit root tests
Software Item: GLSDETREND: RATS procedure to perform local to unity GLS detrending
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