A simple method for testing cointegration subject to regime

• Autor(es): Gabriel, Vasco J. ; Sola, Martin ; Psaradakis, Zacharias
• Data: 2001
• Identificador Persistente: http://hdl.handle.net/1822/1440
• Origem: RepositóriUM - Universidade do Minho
• Assunto(s): Cointegration; Markov switching; Standardized residuals
• Tipo de Documento: Research paper
• Idioma: Inglês

Descrição

In this paper, we propose a simple method for testing cointegration in models that allow for multiple shifts in the long run relationship. The procedure consists of computing conventional residual-based tests with standardized residuals from Markov switching estimation. No new critical values are needed. An empirical application to the present value model of stock prices is presented, complemented by a small Monte Carlo experiment.