Stationarity tests exhibit extreme size distortions if the observable process is stationary yet highly persistent. In this paper we provide a theoretical explanation for the size distortion of the K PSS test for DGPs with a broad range of first order autocorrelation coefficient. Considering a near-integrated, nearly stationary process we show that the asymptotic distribution of the test contains an additional term, which can potentially explain the amount of size distortion documented in previous simulation studies.
The Fragility of the KPSS Stationarity Test
LUBIAN, Diego
2010-01-01
Abstract
Stationarity tests exhibit extreme size distortions if the observable process is stationary yet highly persistent. In this paper we provide a theoretical explanation for the size distortion of the K PSS test for DGPs with a broad range of first order autocorrelation coefficient. Considering a near-integrated, nearly stationary process we show that the asymptotic distribution of the test contains an additional term, which can potentially explain the amount of size distortion documented in previous simulation studies.
File in questo prodotto:
Non ci sono file associati a questo prodotto.
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
