Abstract
The received wisdom that the levels of many economic time series are generated by processes with a unit autoregressive root has been called into question by recent work of Perron. When break points, or interventions, in the time series are allowed it emerges that the unit roots hypothesis can often be rejected at quite low significance levels. Taking for illustration a single time series, U.S. common stock prices, we demonstrate that Perron's conclusions are very sensitive to the choice of break point, and that the data contain little support for the particular choice imposed by Perron.
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Newbold, P., Agiakloglou, C. U.S. Common stock prices, 1871–1970: playing with dummies. Rev Quant Finan Acc 2, 215–220 (1992). https://doi.org/10.1007/BF00243804
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DOI: https://doi.org/10.1007/BF00243804