Premium
SUBSAMPLING THE JOHANSEN TEST WITH STABLE INNOVATIONS
Author(s) -
Chen Pu,
Hsiao ChihYing
Publication year - 2010
Publication title -
australian and new zealand journal of statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.434
H-Index - 41
eISSN - 1467-842X
pISSN - 1369-1473
DOI - 10.1111/j.1467-842x.2009.00566.x
Subject(s) - cointegration , mathematics , nonparametric statistics , nuisance parameter , generalization , johansen test , econometrics , nuisance , variance (accounting) , statistics , statistical hypothesis testing , property (philosophy) , error correction model , economics , mathematical analysis , philosophy , accounting , epistemology , estimator , political science , law
Summary By taking into account the thick‐tail property of the errors, cointegration analysis in vector error‐correction models with infinite‐variance stable errors is a natural generalization of cointegration analysis in error‐correction models with normally distributed errors. We study the Johansen test for cointegrated systems under symmetric stable innovations with discrete spectral measures. The results show that the distributions of the Johansen test statistics under these innovations involve nuisance parameters. To overcome the problem of nuisance parameters, we implement a nonparametric subsampling procedure. We document some subsampling simulation results and demonstrate in an empirical example how the test can be used in practice.