Testing for a unit root in the presence of stochastic volatility and leverage effect

Yong Li (), Terence Tai Leung Chong and Jie Zhang

Economic Modelling, 2012, vol. 29, issue 5, 2035-2038

Abstract: Previous studies have shown that the stationary and nonstationary time-varying volatilities have different implications on the unit root test. In this paper, we provide a Bayesian unit root test for an AR(1) model with stochastic volatility and leverage effect. Monte Carlo simulations show that the proposed Bayesian unit root test statistic achieves good finite sample properties and is robust to the stationarity of stochastic volatility.

Keywords: Bayes factor; Leverage effect; Unit root; Stationarity; Stochastic volatility (search for similar items in EconPapers)
JEL-codes: C11 C12 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:5:p:2035-2038

DOI: 10.1016/j.econmod.2012.04.007

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