The Power of Bootstrap Tests of Cointegration Rank

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Sammanfattning

Bootstrap likelihood ratio tests of cointegration rank are commonly used because they tend to have rejection probabilities that are closer to the nominal level than the rejection probabilities of asymptotic tests. The effect of bootstrapping the test on its power is largely unknown. We show that a new computationally inexpensive procedure can be applied to the estimation of the power function of the bootstrap test of cointegration rank. The bootstrap test is found to have a power function close to that of the level-adjusted asymptotic test. The bootstrap therefore estimates the level-adjusted power of the asymptotic test highly accurately. The bootstrap test may have low power to reject the null hypothesis of cointegration rank zero, or underestimate the cointegration rank. An empirical application to Euribor interest rates is provided as an illustration of the findings.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftComputational Statistics
Volym28
Utgåva6
Sidor (från-till)2719-2748
Antal sidor30
ISSN0943-4062
DOI
StatusPublicerad - 11.06.2013
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

Nyckelord

  • 112 Statistik
  • KOTA2013
  • Equis Base Room

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