A unit root is a property of a non-stationary time series which can lead to spurious regressions and wrong inference.

learn more… | top users | synonyms

1
vote
1answer
28 views

Testing for unit roots

I am an absolute beginner and I need help on testing for unit-roots in Stata. As the data is unbalanced (no missing values, but some time series begin later than others) it seems to me that I could ...
0
votes
0answers
16 views

Maximum lag selection for panel unit root tests

I am interested in conducting panel unit root tests on a panel of subregional annual data where N>100 and T<10 (more specifically, depending on the independent variables included in each ...
1
vote
0answers
13 views

What does the following ADF test in R signify?

While checking for stationarity of differences (first difference) data using ADF test in R, I get that the test statistic is significant for all the deterministic regressors - "none", "drift", ...
1
vote
2answers
145 views

Forecasting: Is correct to say “If the time series is non-stationary” don't use ARIMA models?

In case I dont want to "pre-process" the time series. I do a unit root test, and if it gives that is a non-stationary time series, then I will stay away from ARIMA models. Is this correct?
0
votes
1answer
22 views

Cointegration between a variable of significant seasonality and one with no significant seasonality

After running programs of deseasonalization, I had an output in which one variable held significant seasonality, for which I corrected, and another that did not have. My main objective was to ...
3
votes
1answer
56 views

Explosive processes, non-stationarity and unit roots, how to distinguish?

I understand that if we have a simple model such as: $Y_t$=$\rho$$Y_{t-1}$+$\epsilon_t$ where $\rho$ is less than one in absolute value then we have a stationary process. If $\rho$ equals one then ...
0
votes
2answers
114 views

Which is the best criterion for DF-GLS lag selection?

When you have an output such as this in Stata for dfgls: ...
1
vote
1answer
50 views

Is there an optmal lag choice in the KPSS test?

Is there an optimal lag choice in the KPSS test in Stata? For instance, in my example below, for some lags (less than 7) you reject the null for any level of significance. But afterwards, that does ...
0
votes
0answers
15 views

Augmented Dickey-Fuller test with time trend term

I have time series variable X, Y and Z. I need to analyse these variables by using a VAR model. Before running a regression I did augmented Dickey-Fuller test and found that one variable is stationary ...
2
votes
2answers
52 views

Stationarity after differencing

I have the following two processes: \begin{align} x_t &= x_{t-1} + u_t \tag{1} \\ x_t &= {\beta}_0 + {\beta}_1t + u_t \tag{2} \end{align} Differencing once leads to: \begin{align} \Delta ...
2
votes
1answer
134 views

Lag selection for Augmented Dickey Fuller test

Apologies in advance, I am a beginner so these questions might be quite simple. I am testing log real exchange rates for unit root stationarity for EU15 countries. I was wondering what is the best way ...
2
votes
3answers
141 views

Estimation of unit-root AR(1) model with OLS

Given a random walk $x_t$, $$x_t=x_{t-1}+\varepsilon_t,$$ consider estimating the slope coefficient $\beta$ in $$x_t=\beta x_{t-1}+\varepsilon_t$$ by OLS. This question and the following answer ...
1
vote
2answers
185 views

Augmented Dickey-Fuller Unit Root Test & Cointegration

Using Stata 13. I have a pair of variables (x, y) over time. I want to regress y on x. Do I have to perform a ADF test 1st on x and y to find if both are stationary in their 1st difference (i.e. ...
0
votes
0answers
41 views

Regression with differenced variables

This is my data frame containing some interest rates as well as the amount outstanding of open market operations. Now I want to regress EurOis3 on ...
1
vote
1answer
63 views

Unit roots and order of differencing

I'm studying the stationarity with unit root tests and the order of integration in time series $\ln(x)$ and $\ln(y)$ found here. I'm using Dickey-Fuller test with constant but no trend. From what I ...
0
votes
1answer
64 views

Differencing variables with unit roots

I want to regress my dependent variable on my independent variables in R. First for the level of the variables: lm(y~x+z+u). Now since my variables are ...
0
votes
0answers
148 views

Is it ok to have a unit root within an independent variable?

The Dickey-Fuller and ADF tests testing for a unit root in variables are very sensitive. Some econometricians have personally indicated to me that in some cases it may be acceptable to model a ...
1
vote
2answers
85 views

Non-Stationary: Larger-than-unit root [duplicate]

I keep reading everywhere that a time series is non-stationary (e.g. http://en.wikipedia.org/wiki/Unit_root or http://en.wikipedia.org/wiki/Stationary_process) if there's a unit-root. But isn't a ...
1
vote
0answers
208 views

How to deal with unit roots in panel regression with fixed effects?

I am trying to figure out how to alter my panel regression in a case where fixed effects exists and one (or both) of the variables are I(1) processes (or in other words contain unit root). This is ...
1
vote
1answer
77 views

Difference between random walk and process integrated of order one?

I know that an $I(1)$ process becomes stationary after differencing once. However, I somehow always equated that to its being a random walk because say having a unit root process like \begin{eqnarray} ...
0
votes
2answers
86 views

Unit-root test for unbalanced panel data

I have data on 146 institutions for 15 years. All of them have not data for all time points so that I have unbalanced panel data. How can I calculate a unit-root test in Stata or EViews for this ...
0
votes
0answers
162 views

Augmented Dickey-Fuller Trend and Intercept

I am trying to determine if I should include an "intercept" or a "trend and intercept" when using the Augmented Dickey-Fuller (ADF) test. I ran a regression with my dependent variable and a time ...
0
votes
0answers
35 views

Unit root and cointegration in Panel Data

What should I do when I found out that my variables are stationary in first differencies? Should I estimate model in differencies? How unit root is related with cointegration? Thx for answers.
0
votes
1answer
52 views

daily data series that exist seasonal component

I've a daily dataset(n=76), i try to find the best ARIMA model for forecasting purposes. When i check the correlogram (ACF), i found that there is a wave like pattern and this told me my data presence ...
0
votes
1answer
56 views

Unit Root testing and stationarity of a time series

I'm trying to understand: how is check for stationarity(or lack thereoff) linked to unit root testing. More so the logic of it. i understand the null hypothesis used in adf or kpss but I need the ...
0
votes
0answers
25 views

Large N, small T panel - modeling

I would like to ask your opinion on the possibility to use repeated survey results for panel data models. It is likely that at least some of the variables will be nonstationary. Is it necessary to ...
1
vote
1answer
261 views

Clarification on ARDL/Unrestricted Error Correction Model

I have a few questions about unrestricted error correction models. The UECM for a model where $Y$ is the dependent variable and $x$ is the sole independent variable is given by, $$ \Delta ...
2
votes
0answers
64 views

Regressing nonstationary on stationary variable

I am trying to empirically estimate the coefficient for the Okun's law as a relationship between output growth and unemployment. I am using the simple gap version, where I regress real output growth ...
0
votes
0answers
36 views

Stationarity at different confidence levels

Everyone! My question is, when looking for cointegration between two variables, I need to make sure that they are not stationary in levels. However, one of the variables is not stationary at the 5% ...
3
votes
1answer
2k views

Test for cointegration between two time series using Engle–Granger two-step method

I am seeking to test for cointegration between two time series. Both series have weekly data spanning ~3 years. I am trying to do the Engle-Granger Two Step Method. My order of operations follows. ...
4
votes
1answer
168 views

Best practice for ADF/KPSS unit root testing sequence?

I've been quite confused by the various unit root testing strategies recommended in the literature, so I was hoping others may have some advice on the best way to proceed using ADF and KPSS tests. ...
0
votes
0answers
77 views

Different results in ADF test

I have a question regarding the results I am getting from the augmented dickey fuller test for unit root. I am conducting the test in Eviews and I have the option to choose from intercept/trend and ...
0
votes
0answers
27 views

Unit Root Confirmed- How generate the new series with Diff, Trend,Intercept

I have a data series that became stationary at first difference and including both Trend and Intercept. I know how to generate a new variable using first differencing (Eviews) but how should I cater ...
0
votes
0answers
244 views

KPSS test in R interpretation

So in the R package tseries's kpss.test function, it seems I can specify whether the null hypothesis is trend stationary or level stationary(default). ...
1
vote
1answer
86 views

Structural-break unit-root test

My problem is the following: I have a model forecasting the sales of a certain brand. In period 4 a strike caused the sales to decrease. I want to know whether this strike has caused the sales to ...
0
votes
2answers
157 views

How to interpolate a variable with frequency of 5 years to annual data?

I have two time-series variables: each has 14 points with an interval of 5 years. The precise years are: ...
3
votes
2answers
2k views

How to read UNIT ROOT TEST results obtained from EVIEWS? I mean what values do we study to interpret our result?

Null Hypothesis: D(OIL_PRICES) has a unit root Exogenous: Constant Lag Length: 0 (Automatic - based on SIC, maxlag=22) ...
1
vote
1answer
86 views

Interpretation of results for unitroot test

Let's say I have a pure random walk: ...
0
votes
2answers
49 views

Unit root in shares

Suppose that dependent variable is a share of sth (for example it is a % of positive answers to the same question in each period of time t). If data shows the unit ...
0
votes
0answers
36 views

Unit Root Test and rolling data

Please could you kindly advise on the implication of testing for unit root (using the augmented dickey fuller approach) on rolling data. My feeling is that this wouldn't make much sense given the non ...
1
vote
1answer
208 views

Unit roots and GMM estimation

I want to estimate panel models of the following structure: $y_{it} = \rho y_{i,t-1} + \beta_1 x_1 + \dots + \beta_k x_k + c_i + \gamma_t + \epsilon_{it}$, where $c_i$ are time constant country ...
0
votes
0answers
53 views

Which type of random walk (1? 2? 3?) can unit root test?

Campbell (1997) showed that there are three types of random walk hypotheses classified by the level of restrictions on $\epsilon_t$: RW1 (random walk 1: increments are independent identically ...
2
votes
1answer
2k views

Difference between series with drift and series with trend

A series with drift can be modeled as $y_t = c + \phi y_{t-1} + \epsilon_t$ where $c$ is the drift(constant), and $\phi=1$ A series with trend can be modeled as $y_t = c + \delta t + \phi y_{t-1} + ...
1
vote
0answers
683 views

Interpreting Augmented Dickey-Fuller in R

I know that this has been discussed before, but those discussions did not really answer my questions. I know how the ADF test works, but I am having trouble interpreting the output for the three ...
1
vote
0answers
51 views

Time series with an order of integration greater than 1

The issue of unit roots and what $ I(1) $ variables do to a regression estimation is covered clearly online. However, it is of course possible to have order of integration greater than 1. What does it ...
2
votes
1answer
399 views

How to conduct the Lluís Carrion-i-Silvestre et al. (2005) LM Unit Test and the non-linear ADF in Stata?

I am trying to test stationarity for a panel of 15 countries current account (1980–2012) annual data in Stata. I have chosen the LM unit root test by Lluís Carrion-i-Silvestre et al. (2005; to ...
2
votes
3answers
1k views

Augmented Dickey Fuller output conflicting in Stata

I am required to perform unit root testing on a given time series. The output obtained in Stata is somewhat confusing me. To the best of my knowledge I am obtaining two conflicting results, Stata ...
0
votes
1answer
304 views

If time series is tested for Unit Root by ADF, PP, KPSS,… which one is preferred?

If time series is tested for Unit Root, (by ADF, PP, KPSS,...) problem is detected with some tests and not found by others. which one is preferred? For example if ADF says us that Unit root is existed ...
0
votes
0answers
113 views

Augmented Dickey-Fuller test

I am now working with Stata and I found out I have a unit root in my regression. How can I correct for this, because I can read everywhere what the test does but if you have a unit root, what to do ...
0
votes
1answer
139 views