Robust critical values for unit root tests for series with conditional heteroscedasticity errors: An application of the simple NoVaS transformation

Panagiotis Mantalos

Cogent Economics & Finance, 2017, vol. 5, issue 1, 1274282

Abstract: In this paper, we introduce a set of critical values for unit root tests that are robust in the presence of conditional heteroscedasticity errors using the normalizing and variance-stabilizing transformation (NoVaS) and examine their properties using Monte Carlo methods. In terms of the size of the test, our analysis reveals that unit root tests with NoVaS-modified critical values have actual sizes close to the nominal size. For the power of the test, we find that unit root tests with NoVaS-modified critical values either have the same power as, or slightly better than, tests using conventional Dickey–Fuller critical values across the sample range considered.

Date: 2017
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Working Paper: Robust critical values for unit root tests for series with conditional heteroscedasticity errors: An application of the simple NoVaS transformation (2012)
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DOI: 10.1080/23322039.2016.1274282

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