Optimal Pseudo-Gaussian and Rank-Based Tests of the Cointegration Rank in Semiparametric Error-Correction Models

CentER Discussion Paper Series No. 2015-001

72 Pages Posted: 9 Jan 2015 Last revised: 14 Jan 2015

See all articles by Marc Hallin

Marc Hallin

ECARES, Universite Libre de Bruxelles

Ramon Van den Akker

Tilburg University - CentER and department of Econometrics & OR

Bas J. M. Werker

Tilburg University - Center for Economic Research (CentER)

Date Written: January 8, 2015

Abstract

This paper provides locally optimal pseudo-Gaussian and rank-based tests for the cointegration rank in linear cointegrated error-correction models with i.i.d. elliptical innovations. The proposed tests are asymptotically distribution-free, hence their validity does not depend on the actual distribution of the innovations. The proposed rank-based tests depend on the choice of scores, associated with a reference density that can freely be chosen. Under appropriate choices they are achieving the semiparametric efficiency bounds; when based on Gaussian scores, they moreover uniformly dominate their pseudo-Gaussian counterparts. Simulations show that the asymptotic analysis provides an accurate approximation to finite-sample behavior. The theoretical results are based on a complete picture of the asymptotic statistical structure of the model under consideration.

Keywords: Cointegration model, cointegration rank, elliptical densities

JEL Classification: C14, C32

Suggested Citation

Hallin, Marc and Van den Akker, Ramon and Werker, Bas J.M., Optimal Pseudo-Gaussian and Rank-Based Tests of the Cointegration Rank in Semiparametric Error-Correction Models (January 8, 2015). CentER Discussion Paper Series No. 2015-001, Available at SSRN: https://ssrn.com/abstract=2547432 or http://dx.doi.org/10.2139/ssrn.2547432

Marc Hallin (Contact Author)

ECARES, Universite Libre de Bruxelles ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
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Belgium
+32 2 650 5886 (Phone)
+32 2 650 5899 (Fax)

Ramon Van den Akker

Tilburg University - CentER and department of Econometrics & OR ( email )

K-623
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Tilburg, 5000 LE
Netherlands

HOME PAGE: http://sites.google.com/site/rvdnakker/

Bas J.M. Werker

Tilburg University - Center for Economic Research (CentER) ( email )

Econometrics and Finance Group
5000 LE Tilburg
Netherlands

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