UNIT-ROOT TESTS - THE AUTOREGRESSIVE APPROACH IN COMPARISON WITH THE PERIODOGRAM REGRESSION

In Monte Carlo sudies we investigate unit root tests in line with Dickey/Fuller (1979). In case of positively autocorrelated MA(1) residuals their experimental power is extremely poor. Next we compare different versions of periodogram regression suggested in the literature, Their experimental behaviour is investigated with fractionally integrated processes. It is demonstrated how unit root tests may be based on periodogram regression. There is simulation evidence that those tests may do better in terms of power than the autoregressive tests, especially when testing ARMA(1,1) series against a linear time trend.