Scandinavian Working Papers in Economics
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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 218:
Robust Testing for Fractional Integration Using the Bootstrap

Michael K. Andersson and Mikael P. Gredenhoff

Abstract: Asymptotic tests for fractional integration are usually badly sized in small samples, even for normally distributed processes. Furthermore, tests that are well-sized under normality may be severely distorted by non-normalities and ARCH errors. This paper demonstrates how the bootstrap can be implemented to correct for such size distortions. It is shown that a well-designed bootstrap test based on the MRR and GPH tests is exact, and a procedure based on the REG test is nearly exact.

Keywords: Long-memory; resampling; skewness and kurtosis; ARCH; Monte Carlo; size correction.; (follow links to similar papers)

JEL-Codes: C12; C15; C22; C52; (follow links to similar papers)

19 pages, January 27, 1998

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