Atiq-ur-Rehman, Atiq-ur-Rehman and Zaman, Asad (2009): Impact of Model Specification Decisions on Unit Root Tests.
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Performance of unit tests depends on several specification decisions prior to their application e.g., whether or not to include a deterministic trend. Since there is no standard procedure for making such decisions, therefore the practitioners routinely make several arbitrary specification decisions. In Monte Carlo studies, the design of DGP supports these decisions, but for real data, such specification decisions are often unjustifiable and sometimes incompatible with data. We argue that the problems posed by choice of initial specification are quite complex and the existing voluminous literature on this issue treats only certain superficial aspects of this choice. We also show how these initial specifications affect the performance of unit root tests and argue that Monte Carlo studies should include these preliminary decisions to arrive at a better yardstick for evaluating such tests.
|Item Type:||MPRA Paper|
|Original Title:||Impact of Model Specification Decisions on Unit Root Tests|
|Keywords:||model specification, trend stationary, difference stationary|
|Subjects:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics
|Depositing User:||Atiq-ur- Rehman|
|Date Deposited:||13. Jan 2010 14:37|
|Last Modified:||12. Feb 2013 11:11|
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