The Power of the KPSS-Test for Cointegration when Residuals are Fractionally Integrated

We show that the power of the KPSS-test against integration, as measured by divergence rates of the test statistic under the alternative, remains the same when residuals from an OLS-regression rather than true observations are used. This is in stark contrast to residual based tests of the null of integration in a cointegration setting, where power is drastically reduced when residuals are used.

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Year of publication:	2004
Authors:	Sibbertsen, Philipp ; Krämer, Walter
Publisher:	Dortmund : Universität Dortmund, Sonderforschungsbereich 475 - Komplexitätsreduktion in Multivariaten Datenstrukturen
Subject:	Kointegration \| Theorie \| cointegration \| power \| long memory \| KPSS-Test

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Series:	Technical Report ; 2004,31
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	391712179 [GVK] hdl:10419/22543 [Handle] RePEc:zbw:sfb475:200431 [RePEc]
Classification:	C12 - Hypothesis Testing ; C32 - Time-Series Models
Source:	EconStor

Persistent link: https://www.econbiz.de/10010296614