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st: how zandrews command chooses k lags by t-stat test
I have been reading thru the code for the zandrews command which does an
ADF style unit root test with one break. I am wondering whether one
detail is actually implemented as was described in the paper.
In Zivot and Andrews (1992), p. 255, it says that "It is important to
note that the number of extra regressors, k, required for the ADF
regressions was allowed to vary for each tentative choice of lambda."
The way I read this, you need to re-calculate k for each tentative break
date. Computationally intensive, but makes sense. But as I read the
code for the zandrews command, it appears to calculate k only once at
the beginning, in fact without any breaks at all. Then it seems to use
that same value for every regression over which you minimize the
t-statistic of the lagged regressand, which you test to identify a unit
I am wondering if I am interpreting this correctly. If so, it seems
like a nice heuristic, but different from what is in the original paper....
Zivot, Eric and Donald W.K. Andrews, (1992) “Further Evidence on the
Great Crash, the Oil-Price Shock and the Unit-Root Hypothesis”; Journal
of Business and Economic Statistics; July; Vol 10, No. 3:251-270.
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