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Monte Carlo tests of cointegration with structural breaks

Monte Carlo tests of cointegration with structural breaks The power and size of five cointegration tests, the ADF ‐, Z ˆ ॅ ‐, ECM ‐, SW ‐, and JJ ‐statistics, are evaluated in some large‐scale Monte Carlo simulations, when the underlying system is subjected to regime shifts. Following the suggestion by Gregory and Hansen, selects the minimum value for the shift‐corrected statistics evaluated over a set of tentative break points for the regime shifts. The performance of these statistics is compared to the corresponding ordinary statistics in conditions of regime shifts. The results show that no test uniformly outperforms the others in terms of power in the parameter space we have used. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Kybernetes Emerald Publishing

Monte Carlo tests of cointegration with structural breaks

Kybernetes , Volume 29 (9/10): 14 – Dec 1, 2000

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References (21)

Publisher
Emerald Publishing
Copyright
Copyright © 2000 MCB UP Ltd. All rights reserved.
ISSN
0368-492X
DOI
10.1108/03684920010346347
Publisher site
See Article on Publisher Site

Abstract

The power and size of five cointegration tests, the ADF ‐, Z ˆ ॅ ‐, ECM ‐, SW ‐, and JJ ‐statistics, are evaluated in some large‐scale Monte Carlo simulations, when the underlying system is subjected to regime shifts. Following the suggestion by Gregory and Hansen, selects the minimum value for the shift‐corrected statistics evaluated over a set of tentative break points for the regime shifts. The performance of these statistics is compared to the corresponding ordinary statistics in conditions of regime shifts. The results show that no test uniformly outperforms the others in terms of power in the parameter space we have used.

Journal

KybernetesEmerald Publishing

Published: Dec 1, 2000

Keywords: Cybernetics; Statistics

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