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.