() and Jan Antell
Niklas Ahlgren: Hanken School of Economics, Postal: Arkadiankatu 22, P.O.B. 479; FIN 00101 Helsinki, Finland
Jan Antell: Hanken School of Economics, Postal: P.O.B. 479; FIN 00101 Helsinki, Finland
Abstract: Bootstrap likelihood ratio tests of cointegration rank are commonly used because they tend to have rejection probabilities that are closer to the nominal level than the rejection probabilities of the correspond- ing asymptotic tests. The e¤ect of bootstrapping the test on its power is largely unknown. We show that a new computationally inexpensive procedure can be applied to the estimation of the power function of the bootstrap test of cointegration rank. The bootstrap test is found to have a power function close to that of the level-adjusted asymp- totic test. The bootstrap test estimates the level-adjusted power of the asymptotic test highly accurately. The bootstrap test may have low power to reject the null hypothesis of cointegration rank zero, or underestimate the cointegration rank. An empirical application to Euribor interest rates is provided as an illustration of the findings.
43 pages, June 11, 2009
Full text files
Questions (including download problems) about the papers in this series should be directed to Staffan Dellringer ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2018-01-23 23:32:36.