Lag truncation and the local asymptotic distribution of the ADF test for a unit root

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Abstract

The issue of lag selection in ADF unit root testing is important, even asymptotically, for if the number of lags is not allowed to increase at a certain rate the test might not be correctly sized. However, size control is not the only concern. Indeed, simulations have repeatedly shown how increasing lag lengths tend to be associated with reductions in power, thus adding to the well-known low power problem when the alternative is local to the unit root. But while the simulation evidence is plentiful, there is as of yet almost no asymptotic results that can be used to ascertain whether lag length has any effect on the local asymptotic power of the ADF test. The purpose of the present paper is to fill this gap in the literature.

Detaljer

Författare
Enheter & grupper
Externa organisationer
  • Maastricht University
  • Deakin University
Forskningsområden

Ämnesklassifikation (UKÄ) – OBLIGATORISK

  • Sannolikhetsteori och statistik

Nyckelord

Originalspråkengelska
Sidor (från-till)2109-2118
Antal sidor10
TidskriftStatistical Papers
Volym60
Utgåva nummer6
Tidigt onlinedatum2017 maj 11
StatusPublished - 2019 dec
PublikationskategoriForskning
Peer review utfördJa