Stationarity-based specification tests for diffusions when the process is nonstationary

Yacine Ait-Sahalia, Joon Y. Park

Research output: Contribution to journalArticle

10 Scopus citations

Abstract

We analyze in this paper the asymptotic behavior of the specification test of Aït-Sahalia (1996) for the stationary density of a diffusion process, but when the diffusion is not stationary. We consider integrated and explosive processes, as well as nearly integrated ones in the spirit of the local to unity analysis in classical unit root theory. We find that the behavior of the test predicted by the asymptotic distribution under an integrated process provides a better approximation to the small sample distribution of the test than that predicted by the asymptotic distribution under strict stationarity.

Original languageEnglish (US)
Pages (from-to)279-292
Number of pages14
JournalJournal of Econometrics
Volume169
Issue number2
DOIs
StatePublished - Aug 1 2012

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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