High Persistence and Nonlinear Behavior in Financial Variables: a More Powerful Unit Root Testing in the Estar Framework

dc.authorid Corakci, Aysegul/0000-0002-0684-4103
dc.authorscopusid 23978235900
dc.authorscopusid 56941641000
dc.authorscopusid 57300824900
dc.authorwosid Corakci, Aysegul/ABE-3469-2021
dc.contributor.author Omay, Tolga
dc.contributor.author Corakci, Aysegul
dc.contributor.author Hasdemir, Esra
dc.contributor.other Economics
dc.contributor.other International Trade and Logistics
dc.date.accessioned 2024-07-05T15:16:52Z
dc.date.available 2024-07-05T15:16:52Z
dc.date.issued 2021
dc.department Atılım University en_US
dc.department-temp [Omay, Tolga] Atilim Univ, Dept Econ, TR-06830 Ankara, Turkey; [Corakci, Aysegul] Cankaya Univ, Dept Econ, TR-06790 Ankara, Turkey; [Hasdemir, Esra] Univ Turkish Aeronaut Assoc, Dept Logist Management, TR-06790 Ankara, Turkey en_US
dc.description Corakci, Aysegul/0000-0002-0684-4103 en_US
dc.description.abstract In this study, we consider the hybrid nonlinear features of the Exponential Smooth Transition Autoregressive-Fractional Fourier Function (ESTAR-FFF) form unit root test. As is well known, when developing a unit root test for the ESTAR model, linearization is performed by the Taylor approximation, and thereby the nuisance parameter problem is eliminated. Although this linearization process leads to a certain amount of information loss in the unit root testing equation, it also causes the resulting test to be more accessible and consistent. The method that we propose here contributes to the literature in three important ways. First, it reduces the information loss that arises due to the Taylor expansion. Second, the research to date has tended to misinterpret the Fourier function used with the Kapetanios, Shin and Snell (2003) (KSS) unit root test and considers it to capture multiple smooth transition structural breaks. The simulation studies that we carry out in this study clearly show that the Fourier function only restores the Taylor residuals of the ESTAR type function rather than accounting forthe smooth structural break. Third, the new nonlinear unit root test developed in this paper has very strong power in the highly persistent near unit root environment that the financial data exhibit. The application of the Kapetanios Shin Snell- Fractional Fourier (KSS-FF) test to ex-post real interest rates data of 11 OECD countries for country-specific sample periods shows that the new test catches nonlinear stationarity in many more countries than the KSS test itself. en_US
dc.identifier.citationcount 2
dc.identifier.doi 10.3390/math9202534
dc.identifier.issn 2227-7390
dc.identifier.issue 20 en_US
dc.identifier.scopus 2-s2.0-85117401841
dc.identifier.uri https://doi.org/10.3390/math9202534
dc.identifier.uri https://hdl.handle.net/20.500.14411/1685
dc.identifier.volume 9 en_US
dc.identifier.wos WOS:000713302000001
dc.identifier.wosquality Q1
dc.institutionauthor Omay, Tolga
dc.institutionauthor Hasdemir, Esra
dc.language.iso en en_US
dc.publisher Mdpi en_US
dc.relation.publicationcategory Makale - Uluslararası Hakemli Dergi - Kurum Öğretim Elemanı en_US
dc.rights info:eu-repo/semantics/openAccess en_US
dc.scopus.citedbyCount 3
dc.subject ESTAR en_US
dc.subject unit root en_US
dc.subject fractional frequency fourier function en_US
dc.subject near unit root en_US
dc.subject high persistency en_US
dc.subject nonlinear financial variables en_US
dc.title High Persistence and Nonlinear Behavior in Financial Variables: a More Powerful Unit Root Testing in the Estar Framework en_US
dc.type Article en_US
dc.wos.citedbyCount 2
dspace.entity.type Publication
relation.isAuthorOfPublication c49f4d4e-0fdb-400e-ba3c-62ec300b5c96
relation.isAuthorOfPublication 3d84c3c6-38af-41d3-a771-1bea6b914779
relation.isAuthorOfPublication.latestForDiscovery c49f4d4e-0fdb-400e-ba3c-62ec300b5c96
relation.isOrgUnitOfPublication f17c3770-9c6e-4de2-90e7-73c30275c2f9
relation.isOrgUnitOfPublication 91df35e9-cb7b-4457-9edb-26bfbb5d8207
relation.isOrgUnitOfPublication.latestForDiscovery f17c3770-9c6e-4de2-90e7-73c30275c2f9

Files

Collections