Time-Transformed Test for the Explosive Bubbles under Non-stationary Volatility

Eiji Kurozumi, Anton Skrobotov () and Alexey Tsarev

Papers from arXiv.org

Abstract: This paper is devoted to testing for the explosive bubble under time-varying non-stationary volatility. Because the limiting distribution of the seminal Phillips et al. (2011) test depends on the variance function and usually requires a bootstrap implementation under heteroskedasticity, we construct the test based on a deformation of the time domain. The proposed test is asymptotically pivotal under the null hypothesis and its limiting distribution coincides with that of the standard test under homoskedasticity, so that the test does not require computationally extensive methods for inference. Appealing finite sample properties are demonstrated through Monte-Carlo simulations. An empirical application demonstrates that the upsurge behavior of cryptocurrency time series in the middle of the sample is partially explained by the volatility change.

Date: 2020-12, Revised 2021-11
New Economics Papers: this item is included in nep-ecm and nep-ets
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