bvr.test: Unit root test based upon Breitung's variance ratio

In matthewclegg/egcm: Engle-Granger Cointegration Models

Unit root test based upon Breitung's variance ratio

Description

Unit root test based upon Breitung's variance ratio

Usage

bvr.test(Y, detrend = FALSE)
bvr_rho(Y, detrend = FALSE)

Arguments

Y	A vector or zoo-vector
detrend	A boolean, which if TRUE, indicates that the test should be performed after removing a linear trend from Y

Details

Breitung's variance ratio is given by the formula:

rho = (1/T) * sum(cumsum(Y)^2)/sum(Y^2)

where T is the length of the vector Y. (See equation (5) of his paper.)

The advantage of Breitung's variance ratio is that, in contrast to the Dickey-Fuller test and other related tests, it is a nonparametric statistic. In simulations, it seems to perform favorably with respect to the Hurst exponent.

Simulation has been used to determine the distribution of the statistic, and table lookup is used to determine p-values.

If detrend=TRUE, then a linear trend is removed from the data prior to computing the estimator rho. A separate table has been computed of the distribution of values of rho after detrending.

Value

bvr_rho returns the value rho of Breitung's variance ratio.

bvr.test returns a list with class "htest" containing the following components:

statistic	the value of the test statistic.
parameter	the truncation lag parameter.
p.value	the p-value of the test.
method	a character string indicating what type of test was performed.
data.name	a character string giving the name of the data.

Author(s)

Matthew Clegg [e-mail]

References

Breitung, J. (2002). Nonparametric tests for unit roots and cointegration. Journal of econometrics, 108(2), 343-363.

Breitung, J. and Taylor, A.M.R. (2003) Corrigendum to "Nonparametric tests for unit roots and cointegration" [J. Econom. 108 (2002) 343-363] Journal of econometrics, 117(2), 401-404.

See Also

hurstexp egcm

Examples

# The following should produce a low p-value
bvr_rho(rnorm(100))
bvr.test(rnorm(100))

# The following should produce a high p-value
bvr_rho(cumsum(rnorm(100)))
bvr.test(cumsum(rnorm(100)))

# Test with an autoregressive sequence where rho = 0.8
bvr.test(rar1(100, a1=0.8))

# If there is a linear trend, bvr.test with detrend=FALSE
# is likely to find a unit root when there is none:
bvr.test(1:100 + rnorm(100))
bvr.test(1:100 + rnorm(100), detrend=TRUE)

# Display the power of the test for various values of rho and n:
bvr_power(a1=0.8, n=100, nrep=100)
bvr_power(a1=0.9, n=250, nrep=100)
bvr_power(a1=0.95, n=250, nrep=100)

# This is to be compared to the power of the adf.test at this level:
adf_power(a1=0.8, n=100, nrep=100)
adf_power(a1=0.9, n=250, nrep=100)
adf_power(a1=0.95, n=250, nrep=100)

matthewclegg/egcm documentation built on March 5, 2023, 6:33 a.m.