On the importance of the first observation in GLS detrending in unit root testing

Westerlund, Joakim 2015, On the importance of the first observation in GLS detrending in unit root testing, Oxford bulletin of economics and statistics, vol. 77, no. 1, pp. 152-161, doi: 10.1111/obes.12050.

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Title On the importance of the first observation in GLS detrending in unit root testing
Author(s) Westerlund, JoakimORCID iD for Westerlund, Joakim orcid.org/0000-0002-8030-5706
Journal name Oxford bulletin of economics and statistics
Volume number 77
Issue number 1
Start page 152
End page 161
Total pages 10
Publisher Wiley
Place of publication London, Eng.
Publication date 2015-02
ISSN 0305-9049
Keyword(s) Social Sciences
Science & Technology
Physical Sciences
Social Sciences, Mathematical Methods
Statistics & Probability
Business & Economics
Mathematical Methods In Social Sciences
Summary First-differencing is generally taken to imply the loss of one observation, the first, or at least that the effect of ignoring this observation is asymptotically negligible. However, this is not always true, as in the case of generalized least squares (GLS) detrending. In order to illustrate this, the current article considers as an example the use of GLS detrended data when testing for a unit root. The results show that the treatment of the first observation is absolutely crucial for test performance, and that ignorance causes test break-down.
Language eng
DOI 10.1111/obes.12050
Field of Research 150202 Financial Econometrics
Socio Economic Objective 919999 Economic Framework not elsewhere classified
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2013, The Department of Economics, University of Oxford and JohnWiley & Sons
Persistent URL http://hdl.handle.net/10536/DRO/DU:30077701

Document type: Journal Article
Collections: Faculty of Business and Law
Department of Economics
2018 ERA Submission
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