Unit Root Testing with Unstable Volatility

@inproceedings{Beare2008UnitRT,
  title={Unit Root Testing with Unstable Volatility},
  author={Brendan K. Beare},
  year={2008}
}
It is known that unit root test statistics may not have the usual asymptotic properties when the variance of innovations is unstable. In particular, persistent changes in volatility can cause the size of unit root tests to differ from the nominal level. In this paper we propose a class of modified unit root test statistics that are robust to the presence of unstable volatility. The modification is achieved by purging heteroskasticity from the data using a kernel estimate of volatility prior to… CONTINUE READING

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