[Forum SIS] Bocconi DEC Seminar: Giuseppe Cavaliere - October 14th

[Anna Simoni]

Dear colleagues, 



The Department of Decision Sciences (DEC) of Bocconi University is pleased to invite you to the seminar: 


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DEC Seminar 
Università Bocconi, 
Room 3-E4-SR03 
Via Rontgen 1 - 3rd floor 
Time: 12:30pm 

The DEC seminar schedule is available at http://www.unibocconi.eu/statseminar 

Thursday, October 14th 

Giuseppe Cavaliere 
( University of Bologna, Department of Statistical Sciences ) 

"Bootstrap Sequential Determination of the Co-integration Rank in VAR Models" 

Abstract : 

Determining the co-integrating rank of a system of variables has become a fundamental aspect of applied research in macroeconomics and finance. It is wellknown that standard asymptotic likelihood ratio tests for co-integration rank of Johansen (1996) can be unreliable in small samples with empirical rejection frequencies often very much in excess of the nominal level. As a consequence, bootstrap versions of these tests have been developed. To be useful, however, sequential procedures for determining the co-integrating rank based on these bootstrap tests need to be consistent, in the sense that the probability of selecting a rank smaller than (equal to) the true co-integrating rank will converge to zero (one minus the marginal significance level), as the sample size diverges, for general I(1) processes. No such likelihood-based procedure is currently known to be available. In this paper we fill this gap in the literature by proposing a bootstrap sequential algorithm which we demonstrate delivers consistent cointegration rank estimation for general I(1) processes. Finite sample Monte Carlo simulations show the proposed procedure performs well in practice. 

Keywords: Co-integration; trace test; sequential rank determination; i.i.d. 
bootstrap; wild bootstrap. 
J.E.L. Classifications: C30, C32. 

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Sincerely, 
Anna Simoni 

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Anna Simoni 
Assistant Professor 
Department of Decision Sciences 
Università Bocconi 
via Roentgen, 1 
20136 Milano - Italy 
Email: anna.simoni a unibocconi.it 
Webpage: http://faculty.unibocconi.eu/annasimoni/
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