Behaviour of Dickey-Fuller unit-root tests under trend misspecification

Tae Hwan Kim, Stephen Leybourne, Paul Newbold

Research output: Contribution to journalArticle

14 Citations (Scopus)

Abstract

We analyse the case where a unit-root test is based on a Dickey-Fuller regression the only deterministic term of which is a fixed intercept. Suppose, however, as could well be the case, that the actual data-generating process includes a broken linear trend. It is shown theoretically, and verified empirically, that under the I(1) null and I(0) alternative hypotheses the Dickey-Fuller test can display a wide range of different characteristics depending on the nature and location of the break.

Original languageEnglish
Pages (from-to)755-764
Number of pages10
JournalJournal of Time Series Analysis
Volume25
Issue number5
DOIs
Publication statusPublished - 2004 Sep

All Science Journal Classification (ASJC) codes

  • Statistics and Probability
  • Statistics, Probability and Uncertainty
  • Applied Mathematics

Fingerprint Dive into the research topics of 'Behaviour of Dickey-Fuller unit-root tests under trend misspecification'. Together they form a unique fingerprint.

Cite this