Tagged Questions

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

0
votes
0answers
19 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
12 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
47 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
40 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 ...
0
votes
0answers
42 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 ...
0
votes
1answer
141 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
233 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 ...
0
votes
0answers
40 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 ...
0
votes
0answers
35 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
149 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 ...
0
votes
0answers
26 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.
2
votes
3answers
276 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
0answers
63 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 ...
0
votes
0answers
15 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
0
votes
0answers
29 views

Regression when you have both I(1) and I(2) processes

I want to estimate $\log Y_t=\beta_0+\beta_1\log X_{1t}+\beta_2\log X_{2t}+e_t$ Using ADF-tests, I have found that both $\{\log Y_t\}$ and $\{\log X_{1t}\}$ are I(1) (i.e. they contain a unit root), ...
0
votes
0answers
21 views

Can co-integration be conducted if one of the variables is not of the same order?

All my independent variables are stationary at their levels except one variable which became stationary after first difference i.e. my dependent variable. Can I still conduct co-integration test ?
0
votes
1answer
171 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
68 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
114 views
0
votes
1answer
87 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 ...
2
votes
0answers
240 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 ...
2
votes
1answer
91 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) ...
1
vote
2answers
178 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 ...
1
vote
0answers
173 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 ...
0
votes
2answers
62 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 ...
0
votes
0answers
26 views

Distribution of deterministic terms when process is non-stationary (integrated of order I(1), has a unit root)

I am looking for literature (or a solution if there is an easy one) on the asymptotic distribution of deterministic terms in linear regression models when the process is unit-root non-stationary I(1). ...
1
vote
1answer
92 views
0
votes
0answers
109 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 ...
0
votes
1answer
192 views

Dynamic Panel models, GMM, STATA

just joined this forum I really appreciate the coperative spirit between members. I have a silly questions but its quite important for me :s Im wirting a paper about the contribution of foreign banks ...
2
votes
0answers
62 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 ...
0
votes
0answers
44 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
1
vote
2answers
155 views

About the stationarity of a sine wave

I generated two sine wave time series and want to check the stationarity of them. (1) The first time series is short. kpss.test() thinks it is stationary. ...
0
votes
1answer
113 views

What is the real meaning of null hypothesis in unit-root test for a AR(p) process?

There are functions in R (e.g., PP.test and adf.test) which have null hypothesis of unit-root in the process ($H_0$: there is a ...
1
vote
1answer
100 views

How to explain this unit root process?

I have a time series $X_t$ (shown below) with a structure break. The stationary test kpss.test() says it has a unit root. How to explain this? Why does $X_t$ have a ...
0
votes
0answers
107 views

How to determine whether a non-stationary time series has change-in-mean or change-in-variance?

Conditions of a weak-stationary time series are: (1) constant in mean (2) constant in second-order moments. We can test whether a time series is stationary using like ...
2
votes
2answers
621 views

Unit root tests: how to decide if to include a trend and/or a constant

Applying a test to univariate time series data for checking if the series has a unit root or not, one is faced with a decision if one would like to test if the series is stationary around a constant ...
0
votes
0answers
78 views

Is this a stationary time series?

I have a wait-time time series for 10 weekdays(2 weeks) with 10 minutes intervals. I'm having hard time to interpret this? Is this stationary? I also applied Philips-Perron Unit root test and I got ...
0
votes
1answer
3k views
1
vote
1answer
213 views

Exogenous regressors in panel unit root test

From visual inspection I suspect some of the series in my panel dataset to be non-stationary. If I do the panel unit root test on them in EViews 7, I can choose exogenous regressors under ...
0
votes
1answer
388 views

How to interpret the result of Fisher's unit root test [duplicate]

Following are the results from Fisher-type unit-root test for RDI (dependent variable). How do you interpret it? ...
0
votes
1answer
57 views

Testing for a root larger than 1 in AR(p)

My question is the following: How to test for a root larger than 1 in AR(p) process from its observations. Thanks in advance.
4
votes
1answer
3k views

Fisher-type unit-root test for panel data. Results interpretation in Stata

As part of my master thesis, I'm performing several tests on panel data. One of these is a Fisher-type unit-root test, which works well with an unbalanced panel. I have performed the test, but I ...
2
votes
1answer
1k views

Connection of t-statistic and p-value in augmented Dickey-Fuller test

My project is about purchasing power parity (PPP). I am checking whether the real exchange rate of Canadian dollar(CAD)/US dollar(USD), Japanese Yen(JPY)/USD and Great Britain Pound(GBP)/USD has a ...
1
vote
0answers
41 views

How should I set the lag truncation parameter for a KPSS unit root test?

Would appreciate any responses and references if possible. Thank you
6
votes
1answer
4k views

Dickey-Fuller augmented tests: how to choose lags?

I’m trying to model a time series (log_consommation) in a ARIMA(p,d,q) using Stata. So I start by determining d by transforming my time series to make it ...
2
votes
0answers
100 views

About 2 unit root tests and null hypothesis

I have been looking at unit root testing. Specifically 2 tests: The ADF test. The ADF (augmented Dickey Fuller) test has the null hypothesis that "the time series has a unit root" (meaning that the ...
0
votes
1answer
110 views

adf.test returning p-value > 0.99 even when data is stationary

I have a pair of time series that I differenced and now take on values {-1, -0.5, 0, 0.5, 1}. My goal is to test them for Granger causality and discover any lead/lag relationships. Since this ...
1
vote
1answer
34 views

Correcting for random walk

Does taking the first difference of a series with a unit root ALWAYS give us a stationary series? I tried taking the first difference, but Dickey Fuller test tells me the new series still has a unit ...
2
votes
0answers
78 views

Unit root test for ARIMA models

I have a slight confusion regarding seasonal models and which polynomial to use for conducting unit root tests. Given a model: $\phi(B)\Phi(B^s)\Delta^d\Delta^D_S X_t = \theta(B)\Theta(B^s)\epsilon ...
1
vote
1answer
231 views

Unit root test specifications?

I am puzzled as to what specification I should include in my unit root tests of the following data: . I will use ADF, KPSS and ZA tests. I can see there is a break in trend at observation 9. However, ...