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ASYMPTOTIC INFERENCE FOR UNIT ROOT PROCESSES WITH GARCH(1,1) ERRORS

Published online by Cambridge University Press:  06 June 2003

Shiqing Ling  and
W.K. Li
Shiqing Ling
Affiliation:
Hong Kong University of Science and Technology
W.K. Li
Affiliation:
University of Hong Kong
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Abstract

This paper investigates the so-called one-step local quasi–maximum likelihood estimator for the unit root process with GARCH(1,1) errors. When the scaled conditional errors (the ratio of the disturbance to the conditional standard deviation) follow a symmetric distribution, the asymptotic distribution of the estimated unit root is derived only under the second-order moment condition. It is shown that this distribution is a functional of a bivariate Brownian motion as in Ling and Li (1998, Annals of Statistics 26, 84–125) and can be used to construct the unit root test.The authors thank the co-editor, Bruce Hansen, and two referees for very helpful comments and suggestions. W.K. Li's research is partially supported by the Hong Kong Research Grants Council. Ling's research is supported by RGC Competitive Earmarked Research grant HKUST6113/02P.

Type
Research Article
Information
Econometric Theory , Volume 19 , Issue 4 , August 2003 , pp. 541 - 564
Copyright
© 2003 Cambridge University Press

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