Small Sample Adjustment for Hypotheses Testing on Cointegrating Vectors

Abstract Johansen’s (2000. “A Bartlett Correction Factor for Tests of on the Cointegrating Relations.” Econometric Theory 16: 740–78) correction factor LR test linear restrictions cointegrated vectors is derived under i.i.d. Gaussian assumption innovation terms. However, distribution most data relating to financial variables fat-tailed and often skewed; there therefore a need examine small sample inference procedures that require weaker assumptions term. This paper suggests using non-parametric bootstrap approximate Bartlett-type provides statistic does not specification can be used by applied econometricians perform procedure less computationally demanding than it’s analytical counterpart. The involves calculating number values estimating expected value average bootstrapped statistic. Simulation results suggest has good finite property dependent parameter space generating process.