Residual-based tests for fractional cointegration: A Monte Carlo study

Ingolf Dittmann

No 1998,09, Technical Reports from Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen

Abstract: This paper reports on an extensive Monte Carlo study of seven residual-based tests of the hypothesis of no cointegration. Critical values and the power of the tests under the alternative of fractional cointegration are simulated and compared. It turns out that the Phillips-Perron t-test when applied to regression residuals is more powerful than Geweke-Porter-Hudak tests and the Augmented Dickey-Fuller test. Only the Modified Rescaled Range test is more powerful than the Phillips-Perron test in a few situations. Moreover in large samples, the power of the Phillips-Perron test increases if a time trend is included in the cointegrating regression.

Keywords: Fractional cointegration; Monte Carlo experiment; Geweke-Porter-Hudak test; Modified rescaled range test; Phillips-Perron test; Augmented Dickey- Fuller test (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (3)

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Journal Article: Residual‐Based Tests For Fractional Cointegration: A Monte Carlo Study (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb475:199809

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