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J. Risk Financial Manag. 2018, 11(3), 47; https://doi.org/10.3390/jrfm11030047

On the Performance of Wavelet Based Unit Root Tests

1
Department of Economics, Istanbul Bilgi University, Istanbul 34060, Turkey
2
Institute of Graduate Programs, Istanbul Bilgi University, Istanbul 34060, Turkey
*
Author to whom correspondence should be addressed.
Received: 21 June 2018 / Revised: 1 August 2018 / Accepted: 8 August 2018 / Published: 13 August 2018
(This article belongs to the Special Issue Nonparametric Econometric Methods and Application)
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Abstract

In this paper, we apply the wavelet methods in the popular Augmented Dickey-Fuller and M types of unit root tests. Moreover, we provide an extensive comparison of the wavelet based unit root tests which also includes the recent contributions in the literature. Moreover, we derive the asymptotic properties of the wavelet based unit root tests under generalized least squares detrending mechanism. We demonstrate that the wavelet based M tests exhibit better size performance even in problematic cases such as the presence of negative moving average innovations. However, the power performances of the wavelet based unit root tests are quite similar to each other. View Full-Text
Keywords: unit root testing; wavelet; GLS detrending unit root testing; wavelet; GLS detrending
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
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Eroğlu, B.A.; Soybilgen, B. On the Performance of Wavelet Based Unit Root Tests. J. Risk Financial Manag. 2018, 11, 47.

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