SIGN-BASED UNIT ROOT TESTS FOR EXPLOSIVE FINANCIAL BUBBLES IN THE PRESENCE OF DETERMINISTICALLY TIME-VARYING VOLATILITY
| Autor: | Stephen J. Leybourne, Yang Zu, David I. Harvey |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
Explosive autoregression
Economics and Econometrics Explosive material Bubble Right-tailed unit root testing Rational bubble Time-varying volatility Sign-based test JEL Classi…cation: C12 C32 Econometrics Unit root Volatility (finance) Social Sciences (miscellaneous) Economic bubble Statistic Mathematics |
| Zdroj: | Econometric Theory. 36:122-169 |
| ISSN: | 1469-4360 0266-4666 |
| Popis: | This article considers the problem of testing for an explosive bubble in financial data in the presence of time-varying volatility. We propose a sign-based variant of the Phillips, Shi, and Yu (2015, International Economic Review 56, 1043–1077) test. Unlike the original test, the sign-based test does not require bootstrap-type methods to control size in the presence of time-varying volatility. Under a locally explosive alternative, the sign-based test delivers higher power than the original test for many time-varying volatility and bubble specifications. However, since the original test can still outperform the sign-based one for some specifications, we also propose a union of rejections procedure that combines the original and sign-based tests, employing a wild bootstrap to control size. This is shown to capture most of the power available from the better performing of the two tests. We also show how a sign-based statistic can be used to date the bubble start and end points. An empirical illustration using Bitcoin price data is provided. |
| Databáze: | OpenAIRE |
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