Publication Type
Journal Article
Version
submittedVersion
Publication Date
6-2014
Abstract
This article aims to provide some empirical guidelines for the practical implementation of right-tailed unit root tests, focusing on the recursive right-tailed ADF test of Phillips et al. (2011b). We analyze and compare the limit theory of the recursive test under different hypotheses and model specifications. The size and power properties of the test under various scenarios are examined and some recommendations for empirical practice are given. Some new results on the consistent estimation of localizing drift exponents are obtained, which are useful in assessing model specification. Empirical applications to stock markets illustrate these specification issues and reveal their practical importance in testing. © 2013 The Department of Economics, University of Oxford and John Wiley & Sons Ltd.
Keywords
Unit root test, Mildly explosive process, Recursive regression, Size and power
Discipline
Econometrics
Research Areas
Econometrics
Publication
Oxford Bulletin of Economics and Statistics
Volume
76
Issue
3
First Page
315
Last Page
333
ISSN
0305-9049
Identifier
10.1111/obes.12026
Publisher
Wiley
Citation
PHILLIPS, Peter C. B.; SHI, Shuping; and YU, Jun.
Specification sensitivity in right‐tailed unit root testing for explosive behaviour. (2014). Oxford Bulletin of Economics and Statistics. 76, (3), 315-333.
Available at: https://ink.library.smu.edu.sg/soe_research/1796
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/obes.12026