A consistent test for unit root against fractional alternative

Ahmed Bensalma

International Journal of Operational Research, 2016, vol. 27, issue 1/2, 252-274

Abstract: This paper deals with a fractionally integrated, FI(d), processes {y_t, t = 1,... , n}, where the fractional integrated parameter d is any real number greater than 1/2. We show, for these processes, that the suitable hypotheses test for unit root are H₀: d ≥ 1 against H₁: d < 1. These new hypotheses test can be considered as a test for unit root against fractional alternative. The asymptotic distributions under the null and alternative generalise those obtained by Sowell (1990). Monte-Carlo simulations show that the proposed test is robust for any missepecification of the order of integration parameter d and that it fares very well in terms of power and size. The paper ends with empirical applications by revisiting Nelson-Plosser Data.

Keywords: fractional unit root; Dickey-Fuller test; fractional integration; Nelson-Plosser data; Monte-Carlo simulation. (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijores:v:27:y:2016:i:1/2:p:252-274

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