Detrending Bootstrap Unit Root Tests

Smeekes, Stephan

doi:10.1080/07474938.2012.690693

Cited by 18 publications

(18 citation statements)

References 38 publications

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“…These results are in line with the results for the individual bootstrap unit root tests (cf. Chang and Park, 2003;Smeekes, 2009). It is also noticeable that the U R * 4,A test in general has somewhat better size properties than U R * 4,B .…”

Section: Calculatementioning

confidence: 86%

“…The argument we present below can straightforwardly, but tediously, be extended to allow for the inclusion of the lagged level in the regression and OLS or QD-detrending; cf. Smeekes (2009) for the homoskedastic case. Our proof is an adaptation of Park (2002, Proof of Lem.…”

Section: Notesmentioning

confidence: 98%

“…Here we focus on DF tests using the i.i.d. bootstrap (Park, 2002;Chang and Park, 2003;Smeekes, 2009) and the wild bootstrap (Cavaliere and Taylor 2008, in each case using a sieve regression to account for stationary serial correlation. It should be clear, however, that the same arguments hold for any other bootstrap method that delivers an asymptotically valid bootstrap test, such as the different forms of the block bootstrap (Paparoditis and Politis, 2003;Swensen, 2003;Parker, Paparoditis, and Politis, 2006).…”

Section: Remarkmentioning

confidence: 99%

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Bootstrap Union Tests for Unit Roots in the Presence of Nonstationary Volatility

Smeekes

Taylor

2011

Econom. Theory

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propose decision rules based on a four-way union of rejections of quasi-differenced (QD) and ordinary least squares (OLS) detrended tests, both with and without a linear trend, to deal with the first two problems. In this paper we first discuss, again under homoskedasticity, how these union tests may be validly bootstrapped using the sieve bootstrap principle combined with either the independent and identically distributed (i.i.d.) or wild bootstrap resampling schemes. This serves to highlight the complications that arise when attempting to bootstrap the union tests. We then demonstrate that in the presence of nonstationary volatility the union test statistics have limit distributions that depend on the form of the volatility process, making tests based on the standard asymptotic critical values or, indeed, the i.i.d. bootstrap principle invalid. We show that wild bootstrap union tests are, however, asymptotically valid in the presence of nonstationary volatility. The wild bootstrap union tests therefore allow for a joint treatment of all three of the aforementioned issues in practice.

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Section: Calculatementioning

confidence: 86%

Section: Notesmentioning

confidence: 98%

Section: Remarkmentioning

confidence: 99%

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Bootstrap Union Tests for Unit Roots in the Presence of Nonstationary Volatility

Smeekes

Taylor

2011

Econom. Theory

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“…Smeekes (2009) shows for univariate unit root testing that common methods of detrending can be applied to the bootstrap sample such that the asymptotic properties of the tests are correctly replicated as long as the method of detrending in the original sample and the bootstrap sample is the same. Moreover, by simulation it is found there that the properties of the bootstrap tests in finite samples closely follow the asymptotic tests they are based on.…”

Section: Letmentioning

confidence: 98%

Cross-sectional dependence robust block bootstrap panel unit root tests

Palm

Smeekes

Urbain

2011

Journal of Econometrics

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JEL classification: C15 C23Keywords: Block bootstrap Panel unit root test Cross-sectional dependence a b s t r a c t In this paper we consider the issue of unit root testing in cross-sectionally dependent panels. We consider panels that may be characterized by various forms of cross-sectional dependence including (but not exclusive to) the popular common factor framework. We consider block bootstrap versions of the groupmean (Im et al., 2003) and the pooled (Levin et al., 2002) unit root coefficient DF tests for panel data, originally proposed for a setting of no cross-sectional dependence beyond a common time effect. The tests, suited for testing for unit roots in the observed data, can be easily implemented as no specification or estimation of the dependence structure is required. Asymptotic properties of the tests are derived for T going to infinity and N finite. Asymptotic validity of the bootstrap tests is established in very general settings, including the presence of common factors and cointegration across units. Properties under the alternative hypothesis are also considered. In a Monte Carlo simulation, the bootstrap tests are found to have rejection frequencies that are much closer to nominal size than the rejection frequencies for the corresponding asymptotic tests. The power properties of the bootstrap tests appear to be similar to those of the asymptotic tests.

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“…Therefore, in this case, we employ the partly revised version of the resampling-based multiple testing proposed by Romano and Wolf (2005). As the original Romano and Wolf method is constructed based on the assumption of (Smeekes (2013)). In addition, when the equation…”

Section: Multiple Testingmentioning

confidence: 99%

Linear and nonlinear comovement in Southeast Asian local currency bond markets: a stepwise multiple testing approach

Matsuki

2015

Empir Econ

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This study investigates the existence of long-run comovement in the returns of local-currency-denominated bonds of ASEAN-5 countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand). We explore the pairwise cointegration between Asian local currency bond returns indices using stepwise multiple testing. This helps to identify which pairs of bond indices are cointegrated, while avoiding overrejection of the null hypothesis or the multiplicity problem. This method is adjusted to deal with possible cross-sectional correlation among the countries. In addition, we assume linear as well as nonlinear models in order to capture potential gradual and asymptotic adjustment of a linear combination of bond indices toward its mean. We find long-term stable relationships among local currency bond returns for some pairs of countries. Specifically, close interlinkages captured as nonlinear cointegration are evident for at least four pairs of countries, namely Indonesia and the Philippines, Malaysia and the Philippines, the Philippines and Thailand, and Singapore and Thailand. In addition, a relatively weak but significant relationship between Malaysia and Thailand is found. Although the adjustment process toward long-run market equilibrium is characterized by the linear model, comovement in bond returns is observed between Malaysia and Singapore.

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Detrending Bootstrap Unit Root Tests

Abstract: This paper presents an overview of the application of the bootstrap to unit root testing. We show how a bootstrap unit root test can be set up and discuss several options that have been proposed in the literature. The effects of these options on the performance of the test are analysed.

Cited by 18 publications

References 38 publications

Bootstrap Union Tests for Unit Roots in the Presence of Nonstationary Volatility

Bootstrap Union Tests for Unit Roots in the Presence of Nonstationary Volatility

Cross-sectional dependence robust block bootstrap panel unit root tests

Linear and nonlinear comovement in Southeast Asian local currency bond markets: a stepwise multiple testing approach

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