Combining Non‐Cointegration Tests

13 Pages Posted: 23 Dec 2012

See all articles by Christian Bayer

Christian Bayer

University of Bonn

Christoph Hanck

University of Dortmund - Department of Statistics

Date Written: January 2013

Abstract

The local power of many popular non‐cointegration tests has recently been shown to depend on a certain nuisance parameter. Depending on the value of that parameter, different tests perform best. This paper suggests combination procedures with the aim of providing meta tests that maintain high power across the range of the nuisance parameter.1 We demonstrate the local power of the new meta tests to be in general almost as high as that of the most powerful of the underlying tests. When the underlying tests have similar power, the meta tests even appear more powerful than the best underlying test. At the same time, our new meta tests avoid the arbitrary decision which test to use if individual test results conflict. Moreover it avoids the size distortion inherent in separately applying multiple tests for cointegration to the same dataset. We use the new tests to investigate 286 datasets from published cointegration studies. There, in one‐third of all cases individual tests give conflicting results whereas our meta tests provide an unambiguous test decision.

Keywords: Cointegration, meta test, multiple testing

JEL Classification: C12, C22

Suggested Citation

Bayer, Christian and Hanck, Christoph, Combining Non‐Cointegration Tests (January 2013). Journal of Time Series Analysis, Vol. 34, Issue 1, pp. 83-95, 2013, Available at SSRN: https://ssrn.com/abstract=2193202 or http://dx.doi.org/10.1111/j.1467-9892.2012.00814.x

Christian Bayer

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Christoph Hanck

University of Dortmund - Department of Statistics ( email )

D-44221 Dortmund
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
728
PlumX Metrics