Regulated seasonal unit root process

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Burak Alparslan Eroğlu ◽  
Ayşe Özgür Pehlivan
Keyword(s):  
Unit Root ◽  
Testing Procedure ◽  
Unit Root Tests ◽  
Power Performance ◽  
Test Statistic ◽  
Bounded Data ◽  
Size Distortions ◽  
Significant Size ◽  
Joint Occurrence ◽  
Simulation Exercises

Abstract Unfortunately, time series problems do not appear in data singly. We focus on the joint occurrence of nonstationarity, seasonality and bounded data. Seasonal unit root tests and bounded unit root tests already exist in the literature, yet when all these issues are combined their performance needs improvement. That is why we offer a testing procedure for bounded seasonal unit root processes. The combination of these tests is not straightforward as the nonlinearity coming from bounds causes the limiting distribution of the proposed test statistic to be multivariate Brownian motion while the others have univariate distributions. The simulation exercises reveal that the existing tests, which ignores the presence of bounds or seasonality, suffer significant size problems. Our statistic removes the size distortions and also maintain satisfactory power performance.

scholarly journals GROWTH SLOWDOWNS AND MIDDLE-INCOME TRAP: EVIDENCE FROM NEW UNIT ROOT FRAMEWORK

2020 ◽  
pp. 1-17
Author(s):  
FUMITAKA FURUOKA ◽  
KIEW LING PUI ◽  
CHINYERE EZEOKE ◽  
RAY I. JACOB ◽  
OLAOLUWA S. YAYA
Keyword(s):  
Unit Root ◽  
Structural Break ◽  
Testing Procedure ◽  
Policy Implications ◽  
Unit Root Tests ◽  
Cross Sectional ◽  
Middle Income ◽  
Middle Income Countries ◽  
Middle Income Trap ◽  
High Possibility

This paper suggests a new testing procedure to systematically examine the middle-income trap (MIT). To empirically demonstrate this procedure, one high income and 14 middle-income countries are examined using newly developed unit root tests — Fourier ADF with structural break (FADF-SB) and Seemingly Unrelated Regressions Fourier ADF (SUR-FADF). The FADF-SB test incorporates unknown nonlinearity and smooth break in the time-series, while the SUR-FADF test accounts for cross-sectional dependency. The empirical findings produced mixed results: 10 countries have a relatively high possibility of facing the MIT problem, while only one country has a relatively low possibility of facing the problem. For the remaining three countries, it is uncertain whether they will face the problem of MIT. These empirical findings have significant policy implications.

Testing for Unit Roots in Models with Structural Change

1994 ◽  
Vol 10 (5) ◽  
pp. 917-936 ◽  
Author(s):  
Joon Y. Park ◽  
Jaewhan Sung
Keyword(s):  
Structural Change ◽  
Least Squares ◽  
Unit Root ◽  
Unit Roots ◽  
Generalized Least Squares ◽  
Testing Procedure ◽  
Unit Root Tests ◽  
Limiting Distributions ◽  
Independent Unit ◽  
Unit Root Models

This paper considers the unit root tests in models with structural change. Particular attention is given to their dependency on the limiting ratios of the subsample sizes between breaks. The dependency is analyzed in detail, and the invariant testing procedure based on a transformed model is developed. The required transformation is essentially identical to the generalized least-squares correction for heteroskedasticity. The limiting distributions of the new tests do not depend on the relative sizes of the subsamples and are shown to be simple mixtures of the limiting distributions of the corresponding tests from the independent unit root models without structural change.

A family of nonparametric unit root tests for processes driven by infinite variance innovations

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Kemal Caglar Gogebakan
Keyword(s):  
Unit Root ◽  
Unit Root Tests ◽  
Tuning Parameter ◽  
Infinite Variance ◽  
Finite Sample ◽  
Power Performance ◽  
Finite Sample Size ◽  
Heavy Tailed ◽  
The Impact ◽  
Adf Test

Abstract This paper presents extensions to the family of nonparametric fractional variance ratio (FVR) unit root tests of Nielsen (2009. “A Powerful Test of the Autoregressive Unit Root Hypothesis Based on a Tuning Parameter Free Statistic.” Econometric Theory 25: 1515–44) under heavy tailed (infinite variance) innovations. In this regard, we first develop the asymptotic theory for these FVR tests under this setup. We show that the limiting distributions of the tests are free of serial correlation nuisance parameters, but depend on the tail index of the infinite variance process. Then, we compare the finite sample size and power performance of our FVR unit root tests with the well-known parametric ADF test under the impact of the heavy tailed shocks. Simulations demonstrate that under heavy tailed innovations, the nonparametric FVR tests have desirable size and power properties.

Testing the Unit Root Hypothesis When the Alternative is a Trend Break Stationary Process: An Application to Tourist Arrivals in Fiji

2005 ◽  
Vol 11 (3) ◽  
pp. 351-364 ◽  
Author(s):  
Paresh Kumar Narayan
Keyword(s):  
New Zealand ◽  
Structural Change ◽  
Unit Root ◽  
Structural Breaks ◽  
Stationary Process ◽  
Structural Break ◽  
Unit Root Tests ◽  
Test Statistic ◽  
Seminal Contribution ◽  
The Usa

The unit root hypothesis owes much to the work of Dickey and Fuller and has gained momentum since the seminal contribution of Perron (1989), who introduced the idea of structural breaks in unit root tests. In a recent study Sen (2003), extending the work of Zivot and Andrews (1992), recommends the F-test statistic for a unit root in the presence of a structural change in the economy. The central aim of this paper is to apply the Sen test to tourist arrivals to Fiji. The idea behind this exercise is to identify the year of the structural break and, more importantly, to examine whether the break has had a permanent or temporary effect on tourist arrivals in Fiji. Among our key results, we find that visitor arrivals in Fiji from Australia, New Zealand and the USA are stationary, implying that shocks have a temporary effect.

scholarly journals Stationarity against integration in the autoregressive process with polynomial trend

2018 ◽  
Vol 38 (1) ◽  
pp. 1-26
Author(s):  
Frédéric Proïa
Keyword(s):  
Random Walk ◽  
Stochastic Processes ◽  
Unit Root ◽  
Null Hypothesis ◽  
Simulated Data ◽  
Autoregressive Process ◽  
Testing Procedure ◽  
Test Statistic ◽  
Kpss Test ◽  
Polynomial Trend

We tackle the stationarity issue of an autoregressive path with a polynomial trend, and generalize some aspects of the LMC test, the testing procedure of Leybourne and McCabe. First, we show that it is possible to get the asymptotic distribution of the test statistic under the null hypothesis of trend-stationarity as well as under the alternative of nonstationarity for any polynomial trend of order r. Then, we explain the reason why the LMC test, and by extension the KPSS test, does not reject the null hypothesis of trend-stationarity, mistakenly, when the random walk is generated by a unit root located at −1.We also observe it on simulated data and correct the procedure. Finally, we describe some useful stochastic processes that appear in our limiting distributions.

scholarly journals On Combining Evidence from Heteroskedasticity Robust Panel Unit Root Tests in Pooled Regressions

2019 ◽  
Vol 12 (3) ◽  
pp. 117
Author(s):  
Martin Arnold ◽  
Christoph Hanck
Keyword(s):  
Unit Root ◽  
Size Control ◽  
Testing Procedure ◽  
Unit Root Tests ◽  
Computational Statistics ◽  
Panel Unit Root Tests ◽  
Panel Unit Root ◽  
Inflation Rates ◽  
Combined Test ◽  
Contradictory Evidence

Volatility break robust panel unit root tests (PURTs) recently proposed by Herwartz and Siedenburg (Computational Statistics & Data Analysis 2008, 53, 137–150) and Demetrescu and Hanck (Econometrics Letters 2012, 117, 10–13) have different performances under both the null and local alternatives. Common practice in empirical research is to apply multiple tests if none is uniformly superior. We show that this approach tends to produce contradictory evidence for the tests considered, making it unclear whether to reject the null. To address this problem, we advocate a combined testing procedure. Simulation evidence shows that the combined test has good size control and closely tracks the more powerful test. An empirical application reinvestigates whether there is a unit root in OECD inflation rates. We find evidence that inflation is stationary for long observation periods, but we cannot reject nonstationarity in most subsets of countries for the last three decades.

Mean reversion in stock prices: new evidence from panel unit root tests

2007 ◽  
Vol 24 (3) ◽  
pp. 233-244 ◽  
Author(s):  
Paresh Kumar Narayan ◽  
Seema Narayan
Keyword(s):  
Unit Root ◽  
Stock Prices ◽  
Structural Breaks ◽  
Mean Reversion ◽  
Efficient Market Hypothesis ◽  
Unit Root Tests ◽  
Panel Unit Root Tests ◽  
Test Statistic ◽  
Panel Unit Root ◽  
Content Type

PurposeThere are several studies that investigate evidence for mean reversion in stock prices. However, there is no consensus as to whether stock prices are mean reverting or random walk (unit root) processes. The goal of this paper is to re‐examine mean reversion in stock prices.Design/methodology/approachThe authors use five different panel unit root tests, namely the Im, Pesaran and Shin t‐bar test statistic, the Levin and Lin test, the Im, Lee, and Tieslau Lagrangian multiplier test statistic, the seemingly unrelated regression test, and the multivariate augmented Dickey Fuller test advocated by Taylor and Sarno.FindingsThe main finding is that there is no mean reversion of stock prices, consistent with the efficient market hypothesis.Research limitations/implicationsOne issue not considered by this study is the role of structural breaks. It may be the case that the efficient market hypothesis is contingent on structural breaks in stock prices. Future studies should model structural breaks.Practical implicationsThe findings have implications for econometric modelling, in particular forecasting.Originality/valueThis paper adds to the scarce literature on the mean reverting property of stock prices based on panel data; thus, it should be useful for researchers.

An Extended Class of Unit Root Tests for Relative Stock Prices

2014 ◽  
Author(s):  
Shlomo Zilca
Keyword(s):  
Unit Root ◽  
Stock Prices ◽  
Unit Root Tests ◽  
Extended Class

Survey on structural breaks and unit root tests

2020 ◽  
Vol 58 ◽  
pp. 96-141
Author(s):  
A. Skrobotov ◽  
◽  
Keyword(s):  
Unit Root ◽  
Structural Breaks ◽  
Unit Root Tests

scholarly journals Mean reversion in Asia-Pacific stock prices: New evidence from quantile unit root tests

2021 ◽  
Author(s):  
Gilbert V. Nartea ◽  
Harold Glenn A. Valera ◽  
Maria Luisa G. Valera
Keyword(s):  
Unit Root ◽  
Stock Prices ◽  
Mean Reversion ◽  
Unit Root Tests ◽  
Asia Pacific ◽  
New Evidence
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