Testing covariance stationarity

Detalhes bibliográficos
Autor(a) principal: Lima, Luiz Renato Regis de Oliveira
Data de Publicação: 2005
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Institucional do FGV (FGV Repositório Digital)
Texto Completo: http://hdl.handle.net/10438/12583
Resumo: In this paper, we show that the widely used stationarity tests such as the KPSS test has power close to size in the presence of time-varying unconditional variance. We propose a new test as a complement of the existing tests. Monte Carlo experiments show that the proposed test possesses the following characteristics: (i) In the presence of unit root or a structural change in the mean, the proposed test is as powerful as the KPSS and other tests; (ii) In the presence a changing variance, the traditional tests perform badly whereas the proposed test has high power comparing to the existing tests; (iii) The proposed test has the same size as traditional stationarity tests under the null hypothesis of covariance stationarity. An application to daily observations of return on US Dollar/Euro exchange rate reveals the existence of instability in the unconditional variance when the entire sample is considered, but stability is found in sub-samples.
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spelling Lima, Luiz Renato Regis de OliveiraEscolas::EPGEFGV2014-11-25T10:44:38Z2014-11-25T10:44:38Z2005-10-27http://hdl.handle.net/10438/12583In this paper, we show that the widely used stationarity tests such as the KPSS test has power close to size in the presence of time-varying unconditional variance. We propose a new test as a complement of the existing tests. Monte Carlo experiments show that the proposed test possesses the following characteristics: (i) In the presence of unit root or a structural change in the mean, the proposed test is as powerful as the KPSS and other tests; (ii) In the presence a changing variance, the traditional tests perform badly whereas the proposed test has high power comparing to the existing tests; (iii) The proposed test has the same size as traditional stationarity tests under the null hypothesis of covariance stationarity. An application to daily observations of return on US Dollar/Euro exchange rate reveals the existence of instability in the unconditional variance when the entire sample is considered, but stability is found in sub-samples.engEscola de Pós-Graduação em Economia da FGVSeminários de pesquisa econômica da EPGETodo cuidado foi dispensado para respeitar os direitos autorais deste trabalho. Entretanto, caso esta obra aqui depositada seja protegida por direitos autorais externos a esta instituição, contamos com a compreensão do autor e solicitamos que o mesmo faça contato através do Fale Conosco para que possamos tomar as providências cabíveisinfo:eu-repo/semantics/openAccessTesting covariance stationarityinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleEconomiaAnálise de séries temporaisEconometriareponame:Repositório Institucional do FGV (FGV Repositório Digital)instname:Fundação Getulio Vargas (FGV)instacron:FGVORIGINAL1988.pdf1988.pdfapplication/pdf188515https://repositorio.fgv.br/bitstreams/bacccefe-0a4c-4c83-b0cb-73eb2eb6f8e8/download96fe35e2e5d00c0aaf7212e3bca60032MD51LICENSElicense.txtlicense.txttext/plain; charset=utf-84707https://repositorio.fgv.br/bitstreams/f9f7ef10-20fc-4661-bcc1-82c70e09ee95/downloaddfb340242cced38a6cca06c627998fa1MD52TEXT1988.pdf.txt1988.pdf.txtExtracted 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dc.title.eng.fl_str_mv Testing covariance stationarity
title Testing covariance stationarity
spellingShingle Testing covariance stationarity
Lima, Luiz Renato Regis de Oliveira
Economia
Análise de séries temporais
Econometria
title_short Testing covariance stationarity
title_full Testing covariance stationarity
title_fullStr Testing covariance stationarity
title_full_unstemmed Testing covariance stationarity
title_sort Testing covariance stationarity
author Lima, Luiz Renato Regis de Oliveira
author_facet Lima, Luiz Renato Regis de Oliveira
author_role author
dc.contributor.unidadefgv.por.fl_str_mv Escolas::EPGE
dc.contributor.affiliation.none.fl_str_mv FGV
dc.contributor.author.fl_str_mv Lima, Luiz Renato Regis de Oliveira
dc.subject.area.por.fl_str_mv Economia
topic Economia
Análise de séries temporais
Econometria
dc.subject.bibliodata.por.fl_str_mv Análise de séries temporais
Econometria
description In this paper, we show that the widely used stationarity tests such as the KPSS test has power close to size in the presence of time-varying unconditional variance. We propose a new test as a complement of the existing tests. Monte Carlo experiments show that the proposed test possesses the following characteristics: (i) In the presence of unit root or a structural change in the mean, the proposed test is as powerful as the KPSS and other tests; (ii) In the presence a changing variance, the traditional tests perform badly whereas the proposed test has high power comparing to the existing tests; (iii) The proposed test has the same size as traditional stationarity tests under the null hypothesis of covariance stationarity. An application to daily observations of return on US Dollar/Euro exchange rate reveals the existence of instability in the unconditional variance when the entire sample is considered, but stability is found in sub-samples.
publishDate 2005
dc.date.issued.fl_str_mv 2005-10-27
dc.date.accessioned.fl_str_mv 2014-11-25T10:44:38Z
dc.date.available.fl_str_mv 2014-11-25T10:44:38Z
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url http://hdl.handle.net/10438/12583
dc.language.iso.fl_str_mv eng
language eng
dc.relation.ispartofseries.por.fl_str_mv Seminários de pesquisa econômica da EPGE
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dc.publisher.none.fl_str_mv Escola de Pós-Graduação em Economia da FGV
publisher.none.fl_str_mv Escola de Pós-Graduação em Economia da FGV
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