Cost of Misspecification in Break-Model Unit-Root Tests

Florin Maican and Richard J. Sweeney ()
Additional contact information
Richard J. Sweeney: McDonough School of Business, Georgetown University, Postal: 37th and "O" Sts. , NW, Washington, DC, USA

No 536, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: This paper examines power issues for the ADF and four break models (Perron 1989, Zivot and Andrews 1992) when the DGP corresponds to one of the break models. Choosing to test an incorrect break model can but need not greatly reduce the probability of rejecting the null. Break points that are relatively early in the sample period have substantial effects of increasing power. For modest shifts in time trends, simply including a time trend without shift in the model preserves power, but not for large time-trend shifts.

Keywords: Unit root; Monte Carlo; Break models (search for similar items in EconPapers)
JEL-codes: C15 C22 C32 C33 E31 F31 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2012-08-27
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/2077/30147 (text/html)

Related works:
Journal Article: Costs of misspecification in break-model unit-root tests (2014)
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:hhs:gunwpe:0536

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers in Economics from University of Gothenburg, Department of Economics Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Jessica Oscarsson ().