On the Performance of Wavelet Based Unit Root Tests
Burak Alparslan Eroğlu () and
Barış Soybilgen ()
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Burak Alparslan Eroğlu: Department of Economics, Istanbul Bilgi University, Istanbul 34060, Turkey
Journal of Risk and Financial Management, 2018, vol. 11, issue 3, 1-22
In this paper, we apply the wavelet methods in the popular Augmented Dickey-Fuller and M types of unit root tests. Moreover, we provide an extensive comparison of the wavelet based unit root tests which also includes the recent contributions in the literature. Moreover, we derive the asymptotic properties of the wavelet based unit root tests under generalized least squares detrending mechanism. We demonstrate that the wavelet based M tests exhibit better size performance even in problematic cases such as the presence of negative moving average innovations. However, the power performances of the wavelet based unit root tests are quite similar to each other.
Keywords: unit root testing; wavelet; GLS detrending (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:11:y:2018:i:3:p:47-:d:163515
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