A Complementary Test for ADF Test with An Application to the Exchange Rates Returns

Venus, Khim-Sen Liew and Lau, Sie-Hoe and Ling, Siew-Eng (2005) A Complementary Test for ADF Test with An Application to the Exchange Rates Returns. Working Paper. Universiti Malaysia Sabah (UMS).

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Abstract

This study shows that augmented Dickey-Fuller (ADF) test failed to detect covariance nonstationary series. Supportive of Ahamada (2004), this study finds that the cumulative sums of squares procedure in Inclán and Tiao (1994) is useful to complement the ADF test. As illustration, the ADF test indicates that there is no unit root in the returns of Japanese yen/US dollar, British pound/ US dollar and Swiss franc/US. However, the complementary test reveals that each of these returns contains heterogeneous variance. To sum, it can be concluded that these exchange rate returns are covariance nonstationary although there is no unit root.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: augmented Dickey-Fuller (ADF), Exchange Rates, cumulative sums, unimas, university, universiti, Borneo, Malaysia, Sarawak, Kuching, Samarahan, ipta, education, research, Universiti Malaysia Sarawak.
Subjects: H Social Sciences > HG Finance
Divisions: Academic Faculties, Institutes and Centres > Faculty of Economics and Business
Depositing User: Gani
Date Deposited: 08 May 2020 00:17
Last Modified: 08 May 2020 00:17
URI: http://ir.unimas.my/id/eprint/29605

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