Implementing Residual-Based KPSS Tests for Cointegration with Data Subject to Temporal Aggregation and Mixed Sampling Frequencies
نویسندگان
چکیده
We show how temporal aggregation affects the size and power of the DOLS residualbased KPSS test of the null of cointegration. Size is effectively controlled by setting the minimum number of leads equal to one – as opposed to zero – when selecting the lag/lead order of the DOLS regression, but at a cost to power in finite samples. If highfrequency data for one or more series are available, we show how to effectively utilize the high-frequency data to increase power while controlling size. JEL Classification: C12, C22
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