Scandinavian Working Papers in Economics

Working Papers,
National Institute of Economic Research

No 74: Improving Fractional Integration Tests With Bootstrap Distributions

Michael K. Andersson () and Mikael P. Gredenhoff
Additional contact information
Michael K. Andersson: National Institute of Economic Research, Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden
Mikael P. Gredenhoff: AGL Structure Finance, Postal: AGL Structure Finance, Sweden

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.

Keywords: Long memory; Resampling; Skewness and kurtosis; ARCH; Size correction; Power

JEL-codes: C12; C15

18 pages, June 1, 2000

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