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Social and Behavioral Sciences Commons

Open Access. Powered by Scholars. Published by Universities.®

1989

Yale University

Random walk

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Full-Text Articles in Social and Behavioral Sciences

Testing For A Unit Root In The Presence Of Deterministic Trends, Peter C.B. Phillips, Peter Schmidt Oct 1989

Testing For A Unit Root In The Presence Of Deterministic Trends, Peter C.B. Phillips, Peter Schmidt

Cowles Foundation Discussion Papers

This paper provides a new unit root test based on an alternative parameterization which has previously been considered by Bhargava (1986). This parameterization allows for trend under both the null and the alternative, without introducing any parameters that are irrelevant under either. This is not so in the Dickey-Fuller parameterizations. The new test is extracted from the score or LM principle under the assumption that the errors are iid N(0, sigma squared (epsilon)), but our asymptotics hold under more general assumptions about the errors. Two forms of the test (a coefficient test and at t-test) are derived.


Time Series Regression With A Unit Root And Infinite Variance Errors, Peter C.B. Phillips Apr 1989

Time Series Regression With A Unit Root And Infinite Variance Errors, Peter C.B. Phillips

Cowles Foundation Discussion Papers

Chan and Tran give the limit theory for the least squares coefficient in a random walk with the iid errors that are in the domain of attraction of a stable law. This note discusses their results and provides generalizations to the case of I(q) processes with weakly dependent errors whose distributions are in the domain of attraction of a stable law. General unit root tests are also studied. It is shown that the semiparametric corrections suggested by the author for the finite variance case continue to work when the errors have infinite variance. The limit laws are expressed in terms …