On the empirical size of Nielsen's multivariate likelihood ratio test of fractional integration
Nielsen (2004) provides multivariate maximum likelihood procedures to test whether several series are fractionally integrated. This note examines the finite sample size of the likelihood ratio tests applied to a bivariate system experiencing breaks in means. The results suggest that tests of a common unit root are somewhat undersized in small samples.
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Document Type: Research Article
Affiliations: School of Business, Queens University, Goodes Hall, Kingston, Ontario, Canada
Publication date: 2010-05-01