Authors: Marilena Furno
Addresses: Università degli Studi di Napoli 'Federico II', Via Università 100 Portici (NA), Italy
Abstract: The behaviour of unit root tests defined in terms of sign transform is here analysed. The sign transform allows us to gain robustness to non-normality. Contrarily to the standard unit root tests, our results show that these tests are very reliable in the presence of breaks, provided there is no change in the persistence of a series. In case of change in persistence, the paper proposes to compare sign-based test functions separately computed before and after the change point. A statistically significant difference would signal the presence of change in persistence. An example and a Monte Carlo study conclude the analysis.
Keywords: stationarity; unit root tests; robust procedure; L1-norm; change in persistence; sign transform; Monte Carlo simulation.
International Journal of Computational Economics and Econometrics, 2014 Vol.4 No.3/4, pp.269 - 287
Available online: 14 Sep 2014 *Full-text access for editors Access for subscribers Purchase this article Comment on this article