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Burak Eroglu, Kemal Caglar Gogebakan and Mirza Trokic
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Burak Eroglu: Istanbul Bilgi University
Kemal Caglar Gogebakan: Bilkent University
Mirza Trokic: Bilkent University and IHS Markit

Working Papers from The Center for Financial Studies (CEFIS), Istanbul Bilgi University

Abstract: This paper introduces a non-parametric variance ratio testing procedure for seasonal unit roots by utilizing the fractional integration operator. This procedure includes unit root tests at zero, Nyquist, harmonic and joint frequencies. Different from the widely used seasonal unit root tests of Hylleberg et al. (1990)[HEGY], the proposed tests are free from any nuisance and tuning parameters. Furthermore, we develop a new bootstrap technique for the fractional seasonal variance ratio tests by utilizing wavelet filters. This technique allows the practitioners to test for the seasonal unit roots without estimating a parametric regression model. The Monte Carlo simulation evidence reveals that, our proposed fractional seasonal variance ratio [FSVR] tests and the wavelet based bootstrap counterparts have desirable size and power properties.

Keywords: Seasonal unit roots; Fractional integration; Wavelets; Wavestrapping (search for similar items in EconPapers)
JEL-codes: C14 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
Date: 2017-11
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