Title: Semiparametric error-correction models for cointegration with trends: Pseudo-Gaussian and optimal rank-based tests of the cointegration rank
Abstract: This paper provides pseudo-Gaussian and locally optimal rank-based tests for the cointegration rank in linear cointegrated error-correction models with common trends and i.i.d. elliptical innovations. The proposed tests are asymptotically distribution-free, hence their validity does not depend on the actual distribution of the innovations. The proposed rank-based tests depend on the choice of scores, associated with a reference density that can freely be chosen. Under appropriate choices they are achieving the semiparametric efficiency bounds; when based on Gaussian scores, they moreover uniformly dominate their pseudo-Gaussian counterparts. Simulations show that the asymptotic analysis provides an accurate approximation to finite-sample behavior. The theoretical results are based on a complete picture of the asymptotic statistical structure of the model under consideration.
Publication Year: 2016
Publication Date: 2016-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 11
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