variable addition test

Simple Robust Tests for the Specification of High-Frequency Predictors of a Low-Frequency Series

I propose two variable addition test statistics aimed at the specification of a high-frequency predictor of a series observed at a lower frequency. Under the null, the high-frequency predictor is aggregated to the low frequency versus mixed-frequency alternatives. The first test statistic is similar to those in the extant literature, but I show its robustness to conditionally biased forecast error and cointegrated and deterministically trending covariates. It is feasible and consistent even if estimation is not feasible under the alternative.

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