On the Asymptotic Power of Unit Root Tests

Posted: 22 Jan 2012

See all articles by Karim M. Abadir

Karim M. Abadir

Imperial College Business School

Date Written: January 21, 2012

Abstract

Closed forms for the distribution of some conventional statistics are given as a prelude to deriving their asymptotic power functions as unit root tests. In the process, an important distinction is drawn between two classes of statistics: one which relies on deterministic normalizations and the other which uses stochastic normalizations. When the data follow a driftless autoregression, a t test (which belongs to the second class) for a unit root is found to perform better than the other tests in small to moderate effective samples.

Suggested Citation

Abadir, Karim M., On the Asymptotic Power of Unit Root Tests (January 21, 2012). Available at SSRN: https://ssrn.com/abstract=1989461

Karim M. Abadir (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

HOME PAGE: http://www3.imperial.ac.uk/portal/page?_pageid=61,629646&_dad=portallive&_schema=PORTALLIVE

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