Testing for no-cointegration under time-varying variance

Shaoping Wang, Qing Zhao and Yanglin Li

Economics Letters, 2019, vol. 182, issue C, 45-49

Abstract: In this paper, we extend the residual-based Dickey–Fuller (DF) and Zt cointegration tests to allow for time-varying variance and obtain their asymptotic null distributions under this circumstance. To deal with time-varying variance, we develop two corresponding tests by wild bootstrap algorithm. The bootstrap-based tests achieve asymptotic validity in the presence of time-varying volatility. Simulations show that the bootstrap tests perform well in finite samples. Applying our proposed method to the Bitcoin and the Chinese stock market, we find evidence that the Bitcoin market is isolated from the Chinese stock market.

Keywords: Cointegration; Wild bootstrap; Residual-based tests; Time-varying variance; Bitcoin (search for similar items in EconPapers)
JEL-codes: C12 C32 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:182:y:2019:i:c:p:45-49

DOI: 10.1016/j.econlet.2019.06.001

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