Tests for Unit Roots: a Monte Carlo Investigation

29 Pages Posted: 26 Dec 2000 Last revised: 16 Mar 2023

See all articles by G. William Schwert

G. William Schwert

University of Rochester - Simon Business School; National Bureau of Economic Research (NBER)

Date Written: December 1988

Abstract

Recent work by Said and Dickey (1984 ,1985) , Phillips (1987), and Phillips and Perron(1988) examines tests for unit roots in the autoregressive part of mixed autoregressive-integrated-moving average (ARIHA) models (tests for stationarity). Monte Carlo experiments show that these unit root tests have different finite sample distributions than the unit root tests developed by Fuller(1976) and Dickey and Fuller (1979, l981) for autoregressive processes. In particular, the tests developed by Philllps (1987) and Phillips and Perron (1988) seem more sensitive to model misspeciflcation than the high order autoregressive approximation suggested by Said and Diekey(1984).

Suggested Citation

Schwert, G. William, Tests for Unit Roots: a Monte Carlo Investigation (December 1988). NBER Working Paper No. t0073, Available at SSRN: https://ssrn.com/abstract=254517

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