Non-parametric seasonal unit root tests under periodic non-stationary volatility.

ABSTRACT: This paper presents a new non-parametric seasonal unit root testing framework that is robust to periodic non-stationary volatility in innovation variance by making an extension to the fractional seasonal variance ratio unit root tests of Eroğlu et al. (Econ Lett 167:75-80, 2018). The setup allows for both periodic heteroskedasticity structure of Burridge and Taylar (J Econ 104(1):91-117, 2001) and non-stationary volatility structure of Cavaliere and Taylor (Econ Theory 24(1):43-71, 2008). We show that the limiting null distributions of the variance ratio tests depend on nuisance parameters derived from the underlying volatility process. Monte Carlo simulations show that the standard variance ratio tests can be substantially oversized in the presence of such effects. Consequently, we propos

SUBMITTER: Gog Ebakan KCL 

PROVIDER: S-EPMC8901101 | biostudies-literature | 2022 Mar

REPOSITORIES: biostudies-literature