Lag truncation and the local asymptotic distribution of the ADF test for a unit root

Emre Aylar (), Stephan Smeekes and Joakim Westerlund
Additional contact information
Stephan Smeekes: Maastricht University

Statistical Papers, 2019, vol. 60, issue 6, No 13, 2109-2118

Abstract: Abstract The issue of lag selection in ADF unit root testing is important, even asymptotically, for if the number of lags is not allowed to increase at a certain rate the test might not be correctly sized. However, size control is not the only concern. Indeed, simulations have repeatedly shown how increasing lag lengths tend to be associated with reductions in power, thus adding to the well-known low power problem when the alternative is local to the unit root. But while the simulation evidence is plentiful, there is as of yet almost no asymptotic results that can be used to ascertain whether lag length has any effect on the local asymptotic power of the ADF test. The purpose of the present paper is to fill this gap in the literature.

Keywords: ADF test; Unit root testing; Lag selection; Local asymptotic power (search for similar items in EconPapers)
JEL-codes: C12 C13 C33 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s00362-017-0911-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:stpapr:v:60:y:2019:i:6:d:10.1007_s00362-017-0911-y

Ordering information: This journal article can be ordered from
http://www.springer. ... business/journal/362

DOI: 10.1007/s00362-017-0911-y

Access Statistics for this article

Statistical Papers is currently edited by C. Müller, W. Krämer and W.G. Müller

More articles in Statistical Papers from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().