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The robustness of modified unit root tests in the presence of GARCH

[Zeitschriftenartikel]

Cook, Steven

Zitationshinweis

Bitte beziehen Sie sich beim Zitieren dieses Dokumentes immer auf folgenden Persistent Identifier (PID):http://nbn-resolving.de/urn:nbn:de:0168-ssoar-220846

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Abstract The research of Kim and Schmidt (1993) is extended to examine the properties of modified Dickey-Fuller unit root tests in the presence of generalised autoregressive conditional heteroskedasticity (GARCH). Using Monte Carlo simulation, the properties of the tests are examined for a range of GARCH processes over alternative sample sizes. Oversizing is observed for all tests, with the extent of size distortion driven by the volatility, rather than the persistence, of the underlying GARCH process. While the original Dickey-Fuller test is found to exhibit greater size distortion than the modified tests, the modified tests are found to be substantially oversized when the GARCH process exhibits a high degree of volatility, even for large samples.
Klassifikation Allgemeines, spezielle Theorien und "Schulen", Methoden, Entwicklung und Geschichte der Wirtschaftswissenschaften; Wirtschaftsstatistik, Ökonometrie, Wirtschaftsinformatik
Methode Theorieanwendung
Freie Schlagwörter GARCH models; Time Series Economics; Numerical Simulation; Quantitative Finance
Sprache Dokument Englisch
Publikationsjahr 2006
Seitenangabe S. 359-363
Zeitschriftentitel Quantitative Finance, 6 (2006) 4
DOI http://dx.doi.org/10.1080/14697680600702045
Status Postprint; begutachtet (peer reviewed)
Lizenz PEER Licence Agreement (applicable only to documents from PEER project)
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