The impact of the initial condition on covariate augmented unit root tests
We examine the behaviour of OLS-demeaned/detrended and GLS-demeaned/detrended unit root tests that employ stationary covariates, as proposed by Hansen (1995, “Rethinking the Univariate Approach to Unit Root Testing.” Econometric Theory 11:1148–71) and Elliott and Jansson (2003, “Testing for Unit Roo...
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| Format: | Article |
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De Gruyter
2016
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| Online Access: | https://eprints.nottingham.ac.uk/32655/ |
| _version_ | 1848794459533213696 |
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| author | Aristidou, Chrystalleni Harvey, David I. Leybourne, Stephen J. |
| author_facet | Aristidou, Chrystalleni Harvey, David I. Leybourne, Stephen J. |
| author_sort | Aristidou, Chrystalleni |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | We examine the behaviour of OLS-demeaned/detrended and GLS-demeaned/detrended unit root tests that employ stationary covariates, as proposed by Hansen (1995, “Rethinking the Univariate Approach to Unit Root Testing.” Econometric Theory 11:1148–71) and Elliott and Jansson (2003, “Testing for Unit Roots with Stationary Covariates.” Journal of Econometrics 115:75–89), respectively, in situations where the magnitude of the initial condition of the time series under consideration may be non-negligible. We show that the asymptotic power of such tests is very sensitive to the initial condition; OLS- and GLS-based tests achieve relatively high power for large and small magnitudes of the initial condition, respectively. Combining information from both types of test via a simple union of rejections strategy is shown to effectively capture the higher power available across all initial condition magnitudes. |
| first_indexed | 2025-11-14T19:16:32Z |
| format | Article |
| id | nottingham-32655 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:16:32Z |
| publishDate | 2016 |
| publisher | De Gruyter |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-326552020-05-04T17:40:31Z https://eprints.nottingham.ac.uk/32655/ The impact of the initial condition on covariate augmented unit root tests Aristidou, Chrystalleni Harvey, David I. Leybourne, Stephen J. We examine the behaviour of OLS-demeaned/detrended and GLS-demeaned/detrended unit root tests that employ stationary covariates, as proposed by Hansen (1995, “Rethinking the Univariate Approach to Unit Root Testing.” Econometric Theory 11:1148–71) and Elliott and Jansson (2003, “Testing for Unit Roots with Stationary Covariates.” Journal of Econometrics 115:75–89), respectively, in situations where the magnitude of the initial condition of the time series under consideration may be non-negligible. We show that the asymptotic power of such tests is very sensitive to the initial condition; OLS- and GLS-based tests achieve relatively high power for large and small magnitudes of the initial condition, respectively. Combining information from both types of test via a simple union of rejections strategy is shown to effectively capture the higher power available across all initial condition magnitudes. De Gruyter 2016-03-25 Article PeerReviewed Aristidou, Chrystalleni, Harvey, David I. and Leybourne, Stephen J. (2016) The impact of the initial condition on covariate augmented unit root tests. Journal of Time Series Econometrics, 9 (1). ISSN 1941-1928 Unit root tests; stationary covariates; initial condition uncertainty; asymptotic power https://www.degruyter.com/view/j/jtse.2017.9.issue-1/jtse-2015-0013/jtse-2015-0013.xml doi:10.1515/jtse-2015-0013 doi:10.1515/jtse-2015-0013 |
| spellingShingle | Unit root tests; stationary covariates; initial condition uncertainty; asymptotic power Aristidou, Chrystalleni Harvey, David I. Leybourne, Stephen J. The impact of the initial condition on covariate augmented unit root tests |
| title | The impact of the initial condition on covariate augmented unit root tests |
| title_full | The impact of the initial condition on covariate augmented unit root tests |
| title_fullStr | The impact of the initial condition on covariate augmented unit root tests |
| title_full_unstemmed | The impact of the initial condition on covariate augmented unit root tests |
| title_short | The impact of the initial condition on covariate augmented unit root tests |
| title_sort | impact of the initial condition on covariate augmented unit root tests |
| topic | Unit root tests; stationary covariates; initial condition uncertainty; asymptotic power |
| url | https://eprints.nottingham.ac.uk/32655/ https://eprints.nottingham.ac.uk/32655/ https://eprints.nottingham.ac.uk/32655/ |