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

2
votes
1answer
29 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
78 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
46 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
36 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
29 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
55 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
57 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
63 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
110 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
31 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
38 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 ...
0
votes
0answers
62 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
28 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
39 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
40 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
19 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
116 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
47 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
801 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
111 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
59 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
21 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
136 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
45 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
118 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: ...
2
votes
1answer
693 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
72 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
26 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
148 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
47 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
70 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 ...
2
votes
1answer
1k 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
596 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
65 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 ...
1
vote
0answers
44 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
325 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
255 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
106 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
134 views
0
votes
1answer
127 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
444 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
117 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
252 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
346 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
79 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 ...
1
vote
1answer
129 views
0
votes
0answers
201 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 ...