On KPSS with GARCH errors

In this paper we discuss the finite sample behavior of the KPSS test in the presence of conditionally heteroskedastic errors. We confirm that under stationary GARCH errors the asymptotics of the KPSS remains valid. However, in finite samples we observe a slight size distortion and a power distortion. Interestingly, IGARCH errors do not seem to affect the size of the test, however they may often cause a substantial loss of power.

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Year of publication:	2005-12-13
Authors:	Barassi, Marco
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 3.2005, 55, p. 1-12
Publisher:	AccessEcon
Subject:	asymptotic and finite sample properties

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Extent:	application/pdf
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010629791