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Optimal Pseudo-Gaussian and Rank-based Tests of the Cointegration Rank in Semiparametric Error-correction Models

Marc Hallin (), Bas Werker () and R. van den Akker
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R. van den Akker: Tilburg University, Center For Economic Research

No 2015-001, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: This paper provides locally optimal pseudo-Gaussian and rank-based tests for the cointegration rank in linear cointegrated error-correction models with i.i.d. elliptical innovations. The proposed tests are asymptotically distribution-free, hence their validity does not depend on the actual distribution of the innovations. The proposed rank-based tests depend on the choice of scores, associated with a reference density that can freely be chosen. Under appropriate choices they are achieving the semiparametric efficiency bounds; when based on Gaussian scores, they moreover uniformly dominate their pseudo-Gaussian counterparts. Simulations show that the asymptotic analysis provides an accurate approximation to finite-sample behavior. The theoretical results are based on a complete picture of the asymptotic statistical structure of the model under consideration.

Keywords: Cointegration model; Cointegration rank; Elliptical densities; erro-correction model; Lagrange multiplier test; Local Asymptotic Brownian Functional; Local Asymptotic Mixed Normality; Local Asymptotic Normality; Multivariate ranks; quasi-likelihood procedures (search for similar items in EconPapers)
JEL-codes: C14 C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: 2015
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