A complementary test for ADF test with an application to the exchange rates returns

Venus Liew, Sie-Hoe Lau and Siew-Eng Ling

MPRA Paper from University Library of Munich, Germany

Abstract: This study shows that augmented Dickey-Fuller (ADF) test failed to detect covariance nonstationary series. Supportive of Ahamada (2004), this study finds that the cumulative sums of squares procedure in Inclán and Tiao (1994) is useful to complement the ADF test. As illustration, the ADF test indicates that there is no unit root in the returns of Japanese yen/US dollar, British pound/ US dollar and Swiss franc/US. However, the complementary test reveals that each of these returns contains heterogeneous variance. To sum, it can be concluded that these exchange rate returns are covariance nonstationary although there is no unit root.

Keywords: cumulative sums of squares; covariance nonstationary; exchange rate returns (search for similar items in EconPapers)
JEL-codes: C12 C22 F31 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-ifn and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/518/1/MPRA_paper_518.pdf original version (application/pdf)

Related works:
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:pra:mprapa:518

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().