A Decision-Theoretic Analysis of the Unit-Root Hypothesis Using Mixtures of Elliptical Models
Bibliographic Data
| ID | 19418782 |
|---|---|
| Authors | Gary Koop (0000-0002-6091-378X, University of Toronto), Mark F J Steel (0000-0001-9858-9279, Tilburg University) |
| Year | 1994 |
| Volume | 12 |
| Issue | 1 |
| Pages | 95-107 |
| Publication date | 1994-01-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Business and Economic Statistics (JOURNAL) |
| Journal identifiers | ISSN: 0735-0015 • E-ISSN: 1537-2707 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/07350015.1994.10509993 |
| OpenAlex | W1968993784 |
| Language | EN |
| Citations received | 1 |
| References cited | 19 |
This paper develops a formal decision theoretic approach to testing for a unit root in economic time series. The approach is empirically implemented by specifying a loss function based on predictive variances; models are chosen so as to minimize expected loss. In addition, the paper broadens the class of likelihood functions traditionally considered in the Bayesian unit root literature by: i) Allowing for departures from normality via the specification of a likelihood based on general elliptical densities; ii) allowing for structural breaks to occur; iii) allowing for moving average errors; and iv) using mixtures of various submodels to create a very flexible overall likelihood. Empirical results indicate that, while the posterior probability of trend-stationarity is quite high for most of the series considered, the unit root model is often selected in the decision theoretic analysis
Bayesian probability · Cointegration · Econometrics · Likelihood function · Maximum likelihood · Normality · Posterior probability · Statistics · Unit root · Unit root test · Computer Science · Financial Risk and Volatility Modeling · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact
| Citations per year | 0.09 |
|---|---|
| Citation span | 2015 - 2015 (1) |
| Highly cited | No |