Cavaliere and Xu developed in 2014 simulation-based versions of existing unit root tests (among which the ADF), valid bounded time series. In this note, we present a Monte Carlo study to investigate, in particular, the power of the simulation-based ADF test against bounded near unit root and bounded fractionally integrated alternative processes. Results show a rather good performance of the simulation-based ADF test, particularly for near unit root alternatives.
On the Power of the Simulation-Based ADF Test in Bounded Time Series
GEROLIMETTO, Margherita;MAGRINI, Stefano
2017-01-01
Abstract
Cavaliere and Xu developed in 2014 simulation-based versions of existing unit root tests (among which the ADF), valid bounded time series. In this note, we present a Monte Carlo study to investigate, in particular, the power of the simulation-based ADF test against bounded near unit root and bounded fractionally integrated alternative processes. Results show a rather good performance of the simulation-based ADF test, particularly for near unit root alternatives.
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