Examination of Some More Powerful Modifications of the Dickey-Fuller Test

Leybourne, Stephen J.; Kim, Tae-Hwan; Newbold, Paul

doi:10.2139/ssrn.423262

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Examination of Some More Powerful Modifications of the Dickey-Fuller Test

University of Nottingham Economics Discussion Paper No. 03/09

31 Pages Posted: 31 Aug 2003

See all articles by Stephen J. Leybourne

Tae-Hwan Kim

University of Nottingham - School of Economics; Yonsei University - Seoul Campus - College of Business and Economics

Paul Newbold

University of Nottingham - School of Economics

Date Written: May 2003

Abstract

Although the t-ratio variant of the Dickey-Fuller test is the most commonly applied unit root test in practical applications, it has been known for some time that readily implementable, more powerful modifications are available. We explore the large sample properties of five of these modified tests, and the small sample properties of these five plus six hybrids. As a result of this study we recommend two particular test procedures.

Keywords: Dickey-Fuller test, MAX test, weighted symmetric estimation, GLS detrending, power comparison

Suggested Citation: Suggested Citation

Leybourne, Stephen J. and Kim, Tae-Hwan and Newbold, Paul, Examination of Some More Powerful Modifications of the Dickey-Fuller Test (May 2003). University of Nottingham Economics Discussion Paper No. 03/09, Available at SSRN: https://ssrn.com/abstract=423262 or http://dx.doi.org/10.2139/ssrn.423262