 A class of simple distribution-free rank-based unit root testsMarc Hallin, Ramon van den Akker and Bas J.M. Werker Journal of Econometrics, 2011, vol. 163, issue 2, 200-214 Abstract: We propose a class of distribution-free rank-based tests for the null hypothesis of a unit root. This class is indexed by the choice of a reference density g, which need not coincide with the unknown actual innovation density f. The validity of these tests, in terms of exact finite-sample size, is guaranteed, irrespective of the actual underlying density, by distribution-freeness. Those tests are locally and asymptotically optimal under a particular asymptotic scheme, for which we provide a complete analysis of asymptotic relative efficiencies. Rather than stressing asymptotic optimality, however, we emphasize finite-sample performances, which also depend, quite heavily, on initial values. It appears that our rank-based tests significantly outperform the traditional Dickey-Fuller tests, as well as the more recent procedures proposed by Elliott et al. (1996), Ng and Perron (2001), and Elliott and Müller (2006), for a broad range of initial values and for heavy-tailed innovation densities. Thus, they provide a useful complement to existing techniques. Keywords: Unit; root; Dickey-Fuller; test; Local; asymptotic; normality; Rank; test (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:163:y:2011:i:2:p:200-214 Access Statistics for this article Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson More articles in Journal of Econometrics from Elsevier |
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