Spurious rejections by Perron tests in the presence of a break

Tae Hwan Kim, Stephen J. Leybourne, Paul Newbold

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

In this paper, we concentrate on the case of an exogeneously chosen break date, but entertain the possibility that an incorrect choice is made. In fact, the Perron test statistics considered are invariant to any break in the generating process at the assumed break date. Our results therefore apply equally to the case of a generating process with two breaks, only one of which is specifically accounted for in the analysis. As in Leybourne et al. (1998), we find that a neglected relatively early break can lead to spurious rejections of the unit root null hypothesis. Moreover, for all but one of the tests analyzed, spurious rejections now also arise if a true break occurs relatively soon after the assumed break date.

Original languageEnglish
Pages (from-to)433-443
Number of pages11
JournalOxford Bulletin of Economics and Statistics
Volume62
Issue number3
Publication statusPublished - 2000 Jul 1

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Rejection
Date
Unit Root
statistics
Null hypothesis
Test Statistic
Invariant
Break dates

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Statistics and Probability
  • Social Sciences (miscellaneous)

Cite this

Kim, Tae Hwan ; Leybourne, Stephen J. ; Newbold, Paul. / Spurious rejections by Perron tests in the presence of a break. In: Oxford Bulletin of Economics and Statistics. 2000 ; Vol. 62, No. 3. pp. 433-443.
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Spurious rejections by Perron tests in the presence of a break. / Kim, Tae Hwan; Leybourne, Stephen J.; Newbold, Paul.

In: Oxford Bulletin of Economics and Statistics, Vol. 62, No. 3, 01.07.2000, p. 433-443.

Research output: Contribution to journalArticle

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