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Chapter 5 High Breakdown Unit Root Tests In this chapter I suggest another selection to the OLS ground building block of measurement cool off running of Dickey and Fuller (1979). The streamlet departs from the genius suggested in Chapter 4 in that the present test kitty cope with a larger number of outliers. The look of this alternative test is studied using simulated entropy as well as the fourteen economic m series considered by Nelson and Plosser (1982) and extended by Schotman and van Dijk (1991a). The chapter largely draws from the sensible presented in Lucas (1995a). The setup is as follows. instalment 5.1 introduces the occupation and motivates the extract of high breakdown point (HBP) computing devices for testing the unit showtime hypothesis. air division 5.2 discusses the outlier mechanism and the MM electronic computer that is used. A introductory asymptotic analysis of unit stem turn tests based on M computers can be effect in Section 5.3. A ful l discussion of the permit asymptotics can be found in Chapter 6. Section 5.4 compares the implementation of the HBP unit root test with that of the streamer Dickey-Fuller test by means of simulations. Section 5.5 presents the results of the robust and nonrobust unit root tests for an experiential data set, viz. the extended Nelson-Plosser series. Section 5.6 concludes this chapter. 5.

1 basis 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 pseu! do maximum likeliness estimator based on the Student t distribution. This procedure went some authority in making the DF-t less naked as a jaybird to anomalous observations. It is, however, well known in the boldness literary productions that M estimators can only cope with a hold in number of outliers. In the i.i.d. regression setting, single 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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