Modified Fast Double Sieve Bootstraps for ADF Tests

Patrick Richard

Cahiers de recherche from Departement d'économique de l'École de gestion à l'Université de Sherbrooke

Abstract: This paper studies the finite sample performance of the sieve bootstrap augmented Dickey-Fuller (ADF) unit root test. It is well known that this test’s accuracy in terms of rejection probability under the null depends greatly on the underlying DGP. Through extensive simulations, we find that it also depends on the numbers of lags employed in the bootstrap DGP and in the bootstrap ADF regression. Based on this finding and using some well established theoretical results, we propose a simple modification that significantly improves the test’s accuracy. We also introduce different versions of the fast double bootstrap, each modified according to the same theoretical basis. According to our simulations, these new testing procedures have lower error in rejection probability under the null while retaining good power.

Keywords: ARMA; bias correction; GLS (search for similar items in EconPapers)
JEL-codes: C13 C22 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2008
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0817.pdf First version, 2008 (application/pdf)

Related works:
Journal Article: Modified fast double sieve bootstraps for ADF tests (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:shr:wpaper:08-17

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