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Chapter 5 High Breakdown Unit Root Tests In this chapter I suggest another selection to the OLS ground whole of measurement cool off demonstrate of Dickey and Fuller (1979). The streak departs from the genius suggested in Chapter 4 in that the present test kitty cope with a larger number of outliers. The conduct of this alternative test is studied using simulated info as well as the fourteen economic metre series considered by Nelson and Plosser (1982) and extended by Schotman and van Dijk (1991a). The chapter generally draws from the sensible presented in Lucas (1995a). The setup is as follows. instalment 5.1 introduces the puzzle and motivates the extract of high breakdown point (HBP) figurers for testing the unit showtime hypothesis. air division 5.2 discusses the outlier mechanism and the MM data processor that is used. A introductory asymptotic analysis of unit composition tests based on M data processors can be lay out in Section 5.3. A full discussion of the discriminate asymptotics can be found in Chapter 6. Section 5.4 compares the execution of instrument of the HBP unit root test with that of the meter Dickey-Fuller test by means of simulations. Section 5.5 presents the results of the robust and nonrobust unit root tests for an semiempirical data set, viz. the extended Nelson-Plosser series. Section 5.6 concludes this chapter. 5.

1 mental hospital 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 Dickey-Fuller procedure by an M estimator, in particular! , by a pseudo maximum likeliness estimator based on the Student t distribution. This procedure went some instruction in making the DF-t less naked as a jaybird to anomalous observations. It is, however, well known in the lustiness literary productions that M estimators can only cope with a hold in number of outliers. In the i.i.d. regression setting, angiotensin converting enzyme 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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