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

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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 ...
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48 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 ...
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84 views

Panel regression and unit roots

I am trying to figure out how to alter my panel regression in a case where unobserved heterogeneity exists and one (or both) of the variables are I(1) processes (or in other words contain unit root). ...
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1answer
26 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} ...
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25 views

unit-root test for unbalanced panel data

I have 146 institutions for 15 years. but all of them have not data for all time then I have unbalanced panel data. How can I examine uint-root test in stata or eviews? how can I define this ...
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44 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 ...
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25 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.
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1answer
33 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 ...
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1answer
36 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 ...
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16 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 ...
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1answer
83 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 ...
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42 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 ...
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35 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% ...
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1answer
421 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. ...
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1answer
93 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. ...
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47 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 ...
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19 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 ...
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96 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). ...
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1answer
42 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 ...
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2answers
101 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: ...
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1answer
385 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) ...
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1answer
57 views

Interpretation of results for unitroot test

Let's say I have a pure random walk: ...
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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 ...
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24 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 ...
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1answer
127 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 ...
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44 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 ...
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65 views

Time Series Econometrics: Cointegration methods for series with mixed degree of integration

I am performing a time series analysis on dataset ranging from 1974-2008. I have performed Augmented Dickey Fuller tests and Phillips Perron tests to check the stationarity/ order of integration of my ...
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831 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} + ...
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548 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 ...
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59 views

Contradictory xtunitroot results

I am using unit root tests in Stata's xtunitroot command. The data are annual wage replacement rates for unemployment benefits in each of the 50 states for 1977 to 2006. (They vary noticably from ...
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42 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 ...
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1answer
298 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 ...
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34 views

unit root testing for exogenous variables

I am running Cointegration and VECM on a set of endogenous and exogenous variables. Do I have to run unit root tests on the exogenous variables and make sure they are I(1)? Thanks a lot.
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3answers
960 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 ...
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76 views

ADF-how to choose from the results?

I am a student and I have a project to do but I have some questions about ADF test. I have 52 observations of quarterly data. I have done the ADF test in my variables in the levels. I tested with ...
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19 views

Comparison test in unit root

I am not clear how to compare all the tests in Unit Root. Which one is the most powerful among: ADF PP KPSS Elliott, Rothenberg & Stock Unit Root Test
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1answer
237 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 ...
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103 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 ...
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1answer
132 views
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1answer
121 views

Cointegrated series

My problem is this: I have 2 series $y$ and $x$ that I want to verify are cointegrated. So first I verified them with ADF unit root test and revealed that one variable is integrated at first ...
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392 views

Confusion about the term “stochastic drift”

After reading lots of material about the subject, I believe that the term "stochastic drift" is defined in a two different ways. These two different definitions make the term unambiguous and I assume ...
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1answer
115 views

prove that this expression converges in probability to zero

Apparently $T^{-3/2} \sum\limits_{t=1}^T{y_{t-1}}u_t$ converges by law to $0.5\times T^{-1/2}\sigma^2 (X-1)$, where $X$ is a $\chi^2(1)$ random variable. $u_t$ is white noise and $y_t$ is an AR(1) ...
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2answers
243 views

What is the best way to proof your time series has a deterministic linear trend

In case you suspect your time series has a linear trend, what is the best way to prove it? If you just regress it against time, you ignore the auto correlation of the time series so I assume that is a ...
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320 views

Raw Prices vs. Daily Return vs. Price Ratio - ADF unit-root test

As the title suggests, I'd like to ask what the difference between using Raw Prices vs. Daily Return vs. Price Ratio in the Augmented Dickey-Fuller unit-root test. The context is that I am trying to ...
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2answers
78 views

Alternatives to Dickey-Fuller test

I'm studying unit root tests and therefore the Dickey Fuller test and I can't seem to figure the following out. Is it correctly understood that the Dickey Fuller test (with drift and constant) is ...
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123 views
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181 views

Paneldata regression where some variables have common unit roots

I've got paneldata on Y, A, B, C. And I am trying to model dependent variable Y on independent variables A, B, C. First I checked for unit roots (in Eviews). Y, A, B, C have no individual unit ...
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1answer
274 views

Dynamic Panel models, GMM, Stata

I am writing a paper about the contribution of foreign banks to economic growth (real GDP per capita), using a panel dataset for $N=6$ countries and $T=40$ quarters. I was planning to use GMM, but I ...
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68 views

Statistical power of unit root test

When studying time series, I once heard the statement that unit root test is less powerful. I hereby have two questions: What does it mean for a test to be powerful? What causes the unit root ...
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56 views

Test of stationarity in Dickey and Fuller test

Why is that in DF (Dickey and Fuller) test, the test verifies that $Tst = 0$ or $Tst < 0$. Why not test $\Phi = 1$ or $\Phi < 1$? Need some guidance on this