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Finite sample of the Durbin-Watson test against fractionally integrated disturbances

Christian Kleiber and Walter Krämer ()

No 2004,15, Technical Reports from Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen

Abstract: We consider the finite sample power of various tests against serial correlation in the disturbances of a linear regression when these disturbances follow a stationary long memory process. It emerges that the power depends on the form of the regressor matrix and that, for the Durbin-Watson test and many other tests that can be written as ratios of quadratic forms in the disturbances, the power can drop to zero for certain regressors. We also provide a means to detect this zero-power trap. Our results depend solely on the correlation structure and allow for fairly arbitrary nonlinearities.

Keywords: Durbin-Watson test; power; autocorrelation; long memory (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Date: 2004
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