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Robust testing for explosive behavior with strongly dependent errors
Lui, Yiu Lim1; Phillips, Peter C.B.2,3,4; Yu, Jun4,5
2024
Source PublicationJournal of Econometrics
ABS Journal Level4
ISSN0304-4076
Volume238Issue:2Pages:105626
Abstract

A heteroskedasticity-autocorrelation robust (HAR) test statistic is proposed to test for the presence of explosive roots in financial or real asset prices when the equation errors are strongly dependent. Limit theory for the test statistic is developed and extended to heteroskedastic models. The new test has stable size properties unlike conventional test statistics that typically lead to size distortion and inconsistency in the presence of strongly dependent equation errors. The new procedure can be used to consistently time-stamp the origination and termination of an explosive episode under similar conditions of long memory errors. Simulations are conducted to assess the finite sample performance of the proposed test and estimators. An empirical application to the S&P 500 index highlights the usefulness of the proposed procedures in practical work.

KeywordExplosiveness Har Test Long Memory s&p 500 Unit Root Test
DOI10.1016/j.jeconom.2023.105626
URLView the original
Indexed BySCIE ; SSCI
Language英語English
WOS Research AreaBusiness & Economics ; Mathematics ; Mathematical Methods In Social Sciences
WOS SubjectEconomics ; Mathematics, Interdisciplinary Applications ; Social Sciences, Mathematical Methods
WOS IDWOS:001131954600001
Scopus ID2-s2.0-85179028305
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Document TypeJournal article
CollectionFaculty of Business Administration
Corresponding AuthorYu, Jun
Affiliation1.Dongbei University of Finance and Economics, China
2.Yale University, United States
3.University of Auckland, New Zealand
4.Singapore Management University, Singapore
5.University of Macau, China
Corresponding Author AffilicationUniversity of Macau
Recommended Citation
GB/T 7714
Lui, Yiu Lim,Phillips, Peter C.B.,Yu, Jun. Robust testing for explosive behavior with strongly dependent errors[J]. Journal of Econometrics, 2024, 238(2), 105626.
APA Lui, Yiu Lim., Phillips, Peter C.B.., & Yu, Jun (2024). Robust testing for explosive behavior with strongly dependent errors. Journal of Econometrics, 238(2), 105626.
MLA Lui, Yiu Lim,et al."Robust testing for explosive behavior with strongly dependent errors".Journal of Econometrics 238.2(2024):105626.
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