Skip to main content

Costs of misspecification in break-model unit-root tests

Buy Article:

$53.17 plus tax (Refund Policy)

Abstract:

This article examines power issues for the ADF and four break models (Perron, 1989; Zivot and Andrews, 1992) when the DGP corresponds to one of the break models. Choosing to test an incorrect break model can, but need not, greatly reduce the probability of rejecting the null. Break points that are relatively early in the sample period have substantial effects of increasing power. For modest shifts in time trends, simply including a time trend without shift in the model preserves power, but not for large time-trend shifts.

Keywords: C15; C22; C32; E31; F31; Monte Carlo; break models; unit root

Document Type: Research Article

DOI: https://doi.org/10.1080/00036846.2013.831171

Affiliations: 1: University of Gothenburg and Research Institute of Industrial Economics (IFN), Box 640, SE,40530, Goteborg, Sweden 2: McDonough School of Business, Georgetown University, 37th and “O” Sts., NW, Washington, DC, 20057, USA

Publication date: 2014-01-02

More about this publication?
  • Access Key
  • Free ContentFree content
  • Partial Free ContentPartial Free content
  • New ContentNew content
  • Open Access ContentOpen access content
  • Partial Open Access ContentPartial Open access content
  • Subscribed ContentSubscribed content
  • Partial Subscribed ContentPartial Subscribed content
  • Free Trial ContentFree trial content
Cookie Policy
X
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more