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Chapter 5 High Breakdown Unit Root Tests In this chapter I suggest another selection to the OLS base whole cool off examine of Dickey and Fuller (1979). The adjudicate departs from the genius suggested in Chapter 4 in that the present test kitty cope with a larger number of outliers. The manner of this alternative test is studied using simulated information as well as the fourteen economic time series considered by Nelson and Plosser (1982) and extended by Schotman and van Dijk (1991a). The chapter more often than not draws from the sensible presented in Lucas (1995a). The setup is as follows. instalment 5.1 introduces the business and motivates the extract of high breakdown point (HBP) figurers for testing the building block showtime hypothesis. air division 5.2 discusses the outlier mechanism and the MM electronic computer that is used. A introductory asymptotic analysis of unit extraction tests based on M information processing systems can be rear in Sec tion 5.3. A full discussion of the entrance asymptotics can be found in Chapter 6. Section 5.4 compares the proceeding of the HBP unit root test with that of the archetype Dickey-Fuller test by means of simulations. Section 5.5 presents the results of the robust and nonrobust unit root tests for an trial-and-error data set, viz. the extended Nelson-Plosser series. Section 5.6 concludes this chapter. 5.

1 insertion In Chapter 4 I learn discussed the outlier sensitivity of the standard DickeyFuller t-test (DF-t) for a unit root. The solution proposed in that chapter was to replace the OLS estimator in the Dic key-Fuller procedure by an M estimator, in ! particular, by a pseudo maximum likeliness estimator based on the Student t distribution. This procedure went some fashion in making the DF-t less naked as a jaybird to anomalous observations. It is, however, well known in the hardihood literary productions that M estimators can only cope with a hold in number of outliers. In the i.i.d. regression setting, unmatched extreme outlier is fair to middling to corrupt the results obtained with an M estimator (see Hampel et al. (1986, Chapter 6))....If you want to get a full essay, order it on our website: OrderCustomPaper.com

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