ABSTRACT
Bent Nielsen
On the distribution of tests for cointegration rank
This paper analyses the likelihood test for the hypothesis of reduced
cointegration rank in a Gaussian vector autoregressive model. In finite
samples the rejection probability for the hypothesis may be quite
different from the promised asymptotic size. An explained is found in the
fact that the test is not similar. A new asymptotic distribution which
depends continuously on the nuisance parameters is suggested. This
captures the functional form of the exact distribution and gives a rather
good approximation. The idea is discussed for some low dimensional examples.