- Why frequency matters for unit root testing in financial time series
- Journal of Business & Economic Statistics
- Volume | Issue number
- 30 | 3
- Pages (from-to)
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
It is generally believed that the power of unit root tests is determined only by the time span of observations, not by their sampling frequency. We show that the sampling frequency does matter for stock data displaying fat tails and volatility clustering, such as financial time series. Our claim builds on recent work on unit root testing based on non-Gaussian GARCH-based likelihood functions. Such methods yield power gains in the presence of fat tails and volatility clustering, and the strength of these features increases with the sampling frequency. This is illustrated using local power calculations and an empirical application to real exchange rates.
- go to publisher's site
If you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the Library know, stating your reasons. In case of a legitimate complaint, the Library will make the material inaccessible and/or remove it from the website. Please Ask the Library, or send a letter to: Library of the University of Amsterdam, Secretariat, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible.