An improved Bayesian unit root test in stochastic volatility models

• Main Authors: LI, Yong, Jun YU
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Bayes factor; Markov chain Monte Carlo; Posterior odds ratio; Stochastic volatility models; Unit root testing; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2311; https://ink.library.smu.edu.sg/context/soe_research/article/3310/viewcontent/aef200104_pv.pdf
• Institution: Singapore Management University

A new posterior odds analysis is developed to test for a unit root in volatilitydynamics in the context of stochastic volatility models. Our analysis extendsthe Bayesian unit root test of So and Li (1999) in two important ways. First,a mixed informative prior distribution with a random weight is int...