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Finite Sample Distributions of t and F Statistics in an AR(1) Model with Anexogenous Variable

Published online by Cambridge University Press:  11 February 2009

J.C. Nankervis  and
N.E. Savin
J.C. Nankervis
Affiliation:
Department of Economics, City of London Polytechnic
N.E. Savin
Affiliation:
Department of Economics, University of Iowa
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Abstract

The distributions of the test statistics are investigated in the context of an AR(1) model where the root is unity or near unity and where the exogenous process is a stable process, a random walk or a time trend. The finite sample distributions are estimated by Monte Carlo methods assuming normal disturbances. The sensitivity of the distributions to both the values of the parameters of the AR(1) model and the process generating the exogenous time series is examined. The Monte Carlo results motivate several theorems which describe the exact sampling behavior of the test statistics. The analytical and empirical results present a mixed picture with respect to the accuracy of the relevant asymptotic approximations.

Type
Research Article
Information
Econometric Theory , Volume 3 , Issue 3 , June 1987 , pp. 387 - 408
Copyright
Copyright © Cambridge University Press 1987

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