New Unit Root Tests in the Nonlinear ESTAR Framework: The Movement and Volatility Characteristics of Crude oil and Copper Prices

Yanglin Li ()
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Yanglin Li: Huazhong University of Science and Technology

Computational Economics, 2024, vol. 63, issue 5, No 4, 1757-1776

Abstract: Abstract This paper proposes new wild bootstrap GLS-detrended unit root tests in the exponential smooth transition autoregressive framework, which could handle both nonlinear movement and time-varying volatility for financial time series. We derive the asymptotic distributions of the proposed tests and explore the finite sample properties. Simulation results show that the size and power performance of the proposed tests are better than the conventional tests. An application on crude oil and copper prices further underlines our test’s priority, and our proposed tests do not reject the unit root null of crude oil and copper prices.

Keywords: Unit root tests; ESTAR; Time-varying volatility; Wild bootstrap (search for similar items in EconPapers)
JEL-codes: C12 C15 C22 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10614-023-10381-8

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