A comparison of semiparametric tests for fractional cointegration

Christian Leschinski, Michelle Voges and Philipp Sibbertsen
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Michelle Voges: Leibniz Universität Hannover

Statistical Papers, 2021, vol. 62, issue 4, No 18, 1997-2030

Abstract: Abstract There are various competing procedures to determine whether fractional cointegration is present in a multivariate time series, but no standard approach has emerged. We provide a synthesis of this literature and conduct a detailed comparative Monte Carlo study to guide empirical researchers in their choice of appropriate methodologies. Special attention is paid on empirically relevant issues such as assumptions about the form of the underlying process and the ability of the procedures to distinguish between short-run correlation and long-run equilibria. It is found that several approaches are severely oversized in presence of correlated short-run components and that the methods show different performance in terms of power when applied to common-component models instead of triangular systems.

Keywords: Long memory; Fractional cointegration; Semiparametric estimation and testing (search for similar items in EconPapers)
Date: 2021
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Working Paper: A Comparison of Semiparametric Tests for Fractional Cointegration (2019)
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DOI: 10.1007/s00362-020-01169-1

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