Publication Type

Journal Article

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: 24 months

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1111/obes.12026

Included in

Econometrics Commons

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