Linearity tests and stochastic trend under the STAR framework

Lingxiang Zhang

doi:10.1007/s00362-018-1047-4

Linearity tests and stochastic trend under the STAR framework

Lingxiang Zhang^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

This study investigates the linearity test of smooth transition autoregressive models when the true data generating process is a stochastic trend process. Results show that, under the null hypothesis of linearity, the asymptotic distribution of the W statistic proposed by Teräsvirta (J Am Stat Assoc 89:208–218, 1994) follows the χ² distribution, whereas the finite sample distribution does not. A maximized Monte Carlo simulation-based test is used to perform the linearity test, and the results show good performance.

Original language	English
Pages (from-to)	2271-2282
Number of pages	12
Journal	Statistical Papers
Volume	61
Issue number	6
DOIs	https://doi.org/10.1007/s00362-018-1047-4
Publication status	Published - 1 Dec 2020

Keywords

Linearity
Maximized Monte Carlo simulation-based test
STAR
Stochastic trend

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abstract = "This study investigates the linearity test of smooth transition autoregressive models when the true data generating process is a stochastic trend process. Results show that, under the null hypothesis of linearity, the asymptotic distribution of the W statistic proposed by Ter{\"a}svirta (J Am Stat Assoc 89:208–218, 1994) follows the χ2 distribution, whereas the finite sample distribution does not. A maximized Monte Carlo simulation-based test is used to perform the linearity test, and the results show good performance.",

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AB - This study investigates the linearity test of smooth transition autoregressive models when the true data generating process is a stochastic trend process. Results show that, under the null hypothesis of linearity, the asymptotic distribution of the W statistic proposed by Teräsvirta (J Am Stat Assoc 89:208–218, 1994) follows the χ2 distribution, whereas the finite sample distribution does not. A maximized Monte Carlo simulation-based test is used to perform the linearity test, and the results show good performance.

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Linearity tests and stochastic trend under the STAR framework

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Keywords

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