On the empirical size of Nielsen's multivariate likelihood ratio test of fractional integration
Abstract: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.
Document Type: Research Article
Affiliations: School of Business, Queens University, Goodes Hall, Kingston, Ontario, Canada
Publication date: May 1, 2010