A Distribution Generating Equation for Unit-Root Statistics
Posted: 22 Jan 2012
Date Written: January 21, 2012
A unified framework to derive the distribution of conventional statistics under a unit root is presented. It is based on formulae which can generate (analytically as well as numerically) the densities and distributions of statistics such as the t ratio, the normalized autocorrelation coefficient, and many more. The name density (or distribution) generating equation is given to these formulae. As a practical example, the numerical and analytical aspects of the distribution of the t ratio under a unit root are discussed. Suggestions for further applications and extensions of these formulae are also given.
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