Download full text
(221.4Kb)
Citation Suggestion
Please use the following Persistent Identifier (PID) to cite this document:
https://nbn-resolving.org/urn:nbn:de:0168-ssoar-220846
Exports for your reference manager
The robustness of modified unit root tests in the presence of GARCH
[journal article]
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 pro... view more
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.... view less
Classification
Economic Statistics, Econometrics, Business Informatics
Basic Research, General Concepts and History of Economics
Method
theory application
Free Keywords
GARCH models; Time Series Economics; Numerical Simulation; Quantitative Finance
Document language
English
Publication Year
2006
Page/Pages
p. 359-363
Journal
Quantitative Finance, 6 (2006) 4
DOI
https://doi.org/10.1080/14697680600702045
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)