GLS based unit root tests for bounded processes

Josep Carrion-i-Silvestre and María Gadea ()

No 201302, AQR Working Papers from University of Barcelona, Regional Quantitative Analysis Group

Abstract: We show that the use of generalized least squares (GLS) detrending procedures leads to important empirical power gains compared to ordinary least squares (OLS) detrend- ing method when testing the null hypothesis of unit root for bounded processes. The non-centrality parameter that is used in the GLS-detrending depends on the bounds, so that improvements on the statistical inference are to be expected if a case-specific parameter is used. This initial hypothesis is supported by the simulation experiment that has been conducted.

Keywords: Unit root; bounded process; quasi GLS-detrending. JEL classification: C12; C22 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2013-04, Revised 2013-04
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (1)

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Journal Article: GLS-based unit root tests for bounded processes (2013)
Working Paper: GLS based unit root tests for bounded processes (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:aqr:wpaper:201302

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