Inference on cointegrating ranks using lr and lm tests based on pseudo-likelihoods

Andre Lucas

Econometric Reviews, 1998, vol. 17, issue 2, 185-214

Abstract: This paper considers Lagrange Multiplier (LM) and Likelihood Ratio (LR) tests for determining the cointegrating rank of a vector autoregressive system. n order to deal with outliers and possible fat-tailedness of the error process, non-Gaussian likelihoods are used to carry out the estimation. The limiting distributions of the tests based on these non-Gaussian pseudo-)likelihoods are derived. These distributions depend on nuisance parameters. An operational procedure is proposed to perform inference. It appears that the tests based on non-Gaussian pseudo-likelihoods are much more powerful than their Gaussian counterparts if the errors are fat-tailed. Moreover, the operational LM-type test has a better overall performance than the LR-type test. Copyright O 1998 by Marcel Dekker, Inc.

Keywords: cointegration; Lagrange multiplier test; likelihood; ratio test; outlier robustness; fat tails; GARCH; pseudo-likelihood (search for similar items in EconPapers)
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/07474939808800411 (text/html)
Access to full text is restricted to subscribers.

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:taf:emetrv:v:17:y:1998:i:2:p:185-214

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/LECR20

DOI: 10.1080/07474939808800411

Access Statistics for this article

Econometric Reviews is currently edited by Dr. Essie Maasoumi

More articles in Econometric Reviews from Taylor & Francis Journals
Bibliographic data for series maintained by ().