Abstract:This chapter shows a way to, using simulation analysis, assess the performance of some of the most popular unit root and change in persistence tests. The authors do this by means of Monte Carlo simulations. The findings suggest that these tests show a lower than expected performance when dealing with some of the processes commonly believed to be found in the economic and financial data. The output signals that extreme care should be taken when trying to support a theory using real data. As the results show, a … Show more
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