Subsampling Unit Root Tests for Heavy-Tailed Observations

It is shown that the subsampling methodology can be used to develop unit root tests when the noise sequence is heavy-tailed with infinite variance. Using least-squares residuals, we construct processes which approximately satisfy the null hypothesis and then, using subsampling, we approximate the null distribution of test statistics. We establish the asymptotic validity of this method and demonstrate its applicability in finite samples by means of a simulation study and a data example.