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On the power of the simulation-based ADF test in bounded time series

Author

Listed:
  • Margherita Gerolimetto

    (Department of Economics - Ca''Foscari University Venice)

  • Stefano Magrini

    (University of Venice)

Abstract
Cavaliere and Xu developed in 2014 simulation-based versions of existing unit root tests (among which the ADF), valid in case the time series under test is bounded. In this note, we present a Monte Carlo study to investigate, in particular, the power of the simulation-based ADF test against bounded near unit root and bounded fractionally integrated alternative processes. Results show a rather good performance of the simulation-based ADF test, particularly for near unit root alternatives.

Suggested Citation

  • Margherita Gerolimetto & Stefano Magrini, 2017. "On the power of the simulation-based ADF test in bounded time series," Economics Bulletin, AccessEcon, vol. 37(1), pages 539-552.
    • Handle: RePEc:ebl:ecbull:eb-16-00277
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    File URL: http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I1-P49.pdf
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Bounded time series; Stationarity; Unit root tests; Monte Carlo experiment;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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