The size performance of a nonparametric unit root test under a variance shift

Daiki Maki

Statistics & Probability Letters, 2008, vol. 78, issue 6, 743-748

Abstract: This paper examines the size performance of Breitung's [2002. Nonparametric tests for unit roots and cointegration. J. Econometrics 108, 343-363.] nonparametric unit root test in the presence of a variance shift. We show that the limiting distribution of the test statistic in the presence of a variance shift depends on the break point of the variance and the ratio of the prebreak to the postbreak variance, as in the case of the standard Dickey-Fuller test. However, our Monte Carlo simulations provide clear evidence that Breitung's nonparametric unit root test achieves a far superior size performance as compared with the Dickey-Fuller test.

Keywords: Unit; root; test; Variance; shift; Size; distortion (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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