Prepivoted Augmented Dickey-Fuller Test with Bootstrap-Assisted Lag Length Selection

We investigate the application of prepivoting in conjunction with lag length selection to correct the size and power performance of the Augmented Dickey-Fuller test for a unit root. The bootstrap methodology used to perform the prepivoting is a residual based AR bootstrap that ensures that bootstrap replicate time series are created under the null irrespective of whether the originally observed series obeys the null hypothesis or not. Simulation studies wherein we examine the performance of our proposed method are given; we evaluate our method’s performance on ARMA(1,1) models with varying configurations for size and power performance. We also propose a novel data dependent lag selection technique that uses bootstrap data under the null to select an optimal lag length; the performance of our method is compared to existing lag length selection criteria.

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Publication Details

Journal
Stats
Published
2024-10-17
DOI
https://doi.org/10.3390/stats7040072
Citations
6
Primary Topic
Monetary Policy and Economic Impact
Type
article
Field-Weighted Citation Impact
4.97

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article

Prepivoted Augmented Dickey-Fuller Test with Bootstrap-Assisted Lag Length Selection

S.C. Maitra, Dimitris N. Politis
6 citations
Stats
Monetary Policy and Economic Impact
4.97
article

Prepivoted Augmented Dickey-Fuller Test with Bootstrap-Assisted Lag Length Selection

S.C. Maitra, Dimitris N. Politis
article en
6 citations

Abstract

We investigate the application of prepivoting in conjunction with lag length selection to correct the size and power performance of the Augmented Dickey-Fuller test for a unit root. The bootstrap methodology used to perform the prepivoting is a residual based AR bootstrap that ensures that bootstrap replicate time series are created under the null irrespective of whether the originally observed series obeys the null hypothesis or not. Simulation studies wherein we examine the performance of our proposed method are given; we evaluate our method’s performance on ARMA(1,1) models with varying configurations for size and power performance. We also propose a novel data dependent lag selection technique that uses bootstrap data under the null to select an optimal lag length; the performance of our method is compared to existing lag length selection criteria.

StatsVol. 7(4)
University of California San Diego (US)
National Science Foundation
Openalex Percentile: Top 4%
Monetary Policy and Economic Impact
4.97
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Prepivoted Augmented Dickey-Fuller Test with Bootstrap-Assisted Lag Length Selection — S.C. Maitra, Dimitris N. Politis · Stats (2024) | TGRS Research Map | TGRS