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Questions tagged [unit-root]

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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391 views

Number of lags for a unit root test

I have some panel data and am suspicious of presence of unit root. As the dataset is unbalanced, I would like to use the xtunitroot fisher command in Stata. Is ...
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18 views

How to apply VAR model for a I(1) and other I(0) variable? Objective is to forecast [duplicate]

I am modeling liquidity variable, real money growth with real asset price returns. The former is I(1) and the latter is I(0). The objective is to see the predictive power and forecast. However, can we ...
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1answer
302 views

Half life (Dickey-Fuller)

If I estimate the regression $$y_t=\alpha+\rho y_{t-1}+\varepsilon_t$$ the half life of this process for $\rho\neq 1$ is $\text{ln}(0.5)/\text{ln}(\rho)$. If I instead estimate the Dickey-Fuller ...
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phi2 interpretation in Dickey-Fuller Test (package urca)

I am testing a time series using ADF test in urca package: summary(ur.df(data, type = "trend", lags = 1, selectlags = "Fixed")) Value of test-statistic is: -9.774 31.8531 47.7796 Critical values ...
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Interpreting R's ur.df (Dickey-Fuller unit root test) results

I am running the following unit root test (Dickey-Fuller) on a time series using the ur.df() function in the urca package. The ...
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34 views

Dickey-Fuller test interpretation (urca package)

I am having trouble with interpreting the Dickey-Fuller test on a time series using the ur.df() function in the urca package. I already read this thread but still need some advise. The command is: ...
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1answer
591 views

Augmented Dickey-Fuller test - showing residuals are serially uncorrelated

I ran an Augmented Dicket-Fuller test to see if there was a unit root present in my time series. I would know like to show that the residuals from the test regression are serially uncorrelated. In the ...
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29 views

Unit Root Testing

I am having some troubles with the unit root test. The are some concepts that I do not fully understand. Could you please tell me if what I write in the following four passages is correct? I am new to ...
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17 views

Super confused about dfuller

I have a rather small dataset and just performed DFuller test for unit root. When testing with zero lags, it contains unit root. When using one lag, it does not contain unit root. However, when ...
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0answers
8 views

How Do I Interpret This Table When Testing For A Unit Root?

I'm testing data for unemployment in Poland for the presence of a unit root. I used NumXL (integrated into Excel) to perform an ADF test, which produced the table shown in the picture attached. How ...
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2answers
8k views

Contradictory results of ADF and KPSS unit root tests

To check whether the data is stationary or not, I computed KPSS and ADF test and got the following results ...
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1answer
945 views

Is a trend-stationary variable I(1) or I(0)?

I am trying to do cointegration analysis between two variables. I first used the standard Dickey-Fuller and Phillips-Perron tests; they concluded my variables were I(1). I then did cointegration and ...
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17 views

Is detrending equivalent to differencing?

Given a non-stationary time series, there are many statistical tests (e.g. ADF, KPSS, etc.) to test whether the series has unit root or not. Equivalently, they test whether a trending time series has ...
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64 views

Are explosive ARMA(1, 1) processes stationary?

I was reviewing time series textbooks recently and have been left confused since. In particular I have looked into the book of Brockwell and Davis (Introduction to Time Series and Forecasting, Second ...
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1answer
112 views

Roots within the unit circle and non-stationarity

I am quite new to time series analysis and I am delving for the first time into stationary processes. I don't seem to understand the concepts of non-stationarity and the presence of roots within the ...
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26 views

Error Correction Model (ECM) procedure

I am getting familiar with ECM so I would like to ask for help in order to understand it. My goal is: performing a ECM in a multivariate context. I was reading ECM is part of a Cointegration analisis....
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1answer
34 views

Why do the Dickey-Fuller test and Lo-MacKinlay Variance Ratio test yield such different outcomes?

It is my belief that a unit root implies a random walk, but not vice versa. Therefore, would one not expect the Dickey-Fuller test to find non-stationarity in the same cases as the Lo-MacKinlay ...
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43 views

Q: Implications of autocorrelation in a Dickey-Fuller unit root test

I am conducting a Dickey-Fuller unit root test on the FEDFUNDS series from the FRED database. My estimation period is quarterly from 1955(1) to 2007(4) (taking the average of the monthly rates within ...
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Testing for (covariance) stationarity specifically (vs. testing for dependence)

I'm using Wooldridge's textbook as my guide for a time-series cross-sectional project. Wooldridge, unlike many, distinguishes between (covariance) stationarity and weak dependence. He says that both ...
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1answer
233 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 ...
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2answers
28 views

Time series has unit root iff integrated of order 1

The wikipedia page for Unit Root says something like "..the stochastic process has a unit root or, alternatively, is integrated of order one..". Are these actually equivalent? Could someone point me ...
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1answer
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What should I conclude if a Unit Root Test gives contradictory results with & without a trend?

I have a data set for a variable, for which I have run some unit-root tests: ADF (constant/without trend): t-stat=-1.0816, p-val=0.7218 - DNR ADF (constant & trend): t-stat=-4.5203, p-val=0.0021 -...
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In Cointegration, adf test or for VAR models. What makes difference in having trend + Constant, Constant alone, and non

In Cointegration, adf test or for VAR models. What makes difference in having trend + Constant, Constant alone, and non. in below link http://www.econ.uiuc.edu/~econ508/R/e-ta8_R.html It said ...
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1answer
857 views

Granger Causality test pre-conditions

I am trying to analyse the causation between individual stock returns and index returns. I have taken the log return values of both stock and index values. Unit root test suggest that the values are ...
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1answer
289 views

Vector error correction model and trending series

I am struggling with VECM pretests. I have conducted correlogram and it shows that all of my variables are nonstationary, except the log of adjusted GDP. So I decide to double check and conduct ADF ...
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22 views

Stationarity test for autocorrelation

can we use unit root test of residual to detect autocorrelation in a time series model? Are stationarity of the residual means there is no autocorrelation?
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1answer
281 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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Unit-root and Johansen- lack of normal distribution

I have a question concerning unit-root data and normal distribution. As an assignment, I am checking the long-term relationship between unemployment rates and labor force participation rate. First I ...
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1answer
3k 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 we ...
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0answers
49 views

Replicating Dickey Fuller? How did they know something was wrong? [cross posted on QF] [closed]

I am interested in testing if there is size distortion through simulations. I have recently been interested in replicating Dickey and Fuller (1979) and this source from another post helped a lot, here ...
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1answer
610 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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Should I test for sphericity and calculate statistical power before running and modelling any forecasting model?

I'm trying to model a regression for one dependent and five independent macroeconomic variables. I'm new to statistics but I've read lots of text books and articles about SEM, cointegration, ols, URT, ...
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279 views

R: interpreting ur.df ADF test results

I'm running ADF test on my data to test for unit root and stationarity, trend, and to find the optimal number of lags using urca package. my code is as follows: <...
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2answers
429 views

Eviews : How to test for cointegration in the right way

I am studying ECM alone using a book and some parts are not explained. First, the book advise to test for a unit and for the order of integration of the series. In eviews options are not pretty clear ...
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1answer
2k views

Is unit root test in panel data required?

I have 212 countries for 16 years of data. (Y=Export, X1= Export Credit, X2= GDP, X3...... X7=Some Dummies). I understand that F test is required to decide if the model is OLS or fixed effect and LM ...
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37 views

Unit root test with a dummy for an event

I'm currently working with financial time series that experience a crash towards the middle of the series. These series are returns. From the graph, these series clearly look stationary. However, due ...
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2answers
2k views

Interpretation Dickey-Fuller Test

ur.df(data, type = "trend", lags = 20, selectlags = "AIC") This is my output : Value of test-statistic is: -3.1535 3.6559 5.1012 ...
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Model identification from Eviews Dickey-Fuller test output

So our econometrics professor gave us the following Eviews outputs. First, it asked if it was the right decision to differentiate twice, which, according to what I interpret from the Eviews display, ...
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128 views

Unit root in time series of log return of s&p 500. What to do? [closed]

I have 9500 closing prices of s&p500. I took daily return of the prices dailyreturn and then log return of the prices logreturn=log(1+dailyreturn). Now I checked the data using augmented Dickey-...
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1answer
59 views

Unit Root Test for Panel Data in R

I'm working with a unbalanced panel dataset of 18 countries with quarterly data from 1970 to 2014 of different characteristics per country (housing prices, education level, total population, GDP per ...
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1answer
259 views

My data passed Johansen test, but they couldn't pass Phillips-Perron test. Why?

I want to choose two-pairs for pairtrading. For pairtradings, two pairs need to pass two tests, the Johansen test (for cointegration) and the P.P. test (for stationary). As I knew, if they related in ...
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1answer
178 views

Time Series Stationarity

I am confused of why my Dickey-Fuller test is significant (which implies stationarity), while the time series clearly exhibits a deterministic trend?
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1answer
129 views

Unit Root - Real Interest Rate

I want to find out whether the real interest rate of different countries are non-stationary. The real interest rate is defined as the difference between the nominal interest rate and the inflation ...
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1answer
844 views

ADF test showing stationary for a non stationary series

I am running an ADF test in R on the following series: This to me is clearly non-stationary, but when I run the ADF test: ...
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0answers
177 views

How to relate roots of AR and MA to unit circle

I'm working on these problems and think I figured out most of the steps, but am stuck near the end as I don't understand how to relate my roots back to the unit circle in order to determine ...
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0answers
26 views

Time series that is never stationary by differencing

When I was looking at time series I noticed that a common approach to time series modelling is the ARIMA model which basically does differencing until a stationary series is found and then fits the ...
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1answer
44 views

Why is Dickey-Fuller test applied on the difference operator and not on the variable directly?

Why is not the Dickey-Fuller test applied directly on : $Y_t = \rho Y_{t-1} + u_t$ instead of : $\Delta Y_t = (\rho-1) Y_{t-1} + u_t$. Many papers apply the Dicker-Fuller on the first difference ...
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0answers
342 views

Unit root testing with two structural breaks

I'm investigating two possibly cointegrating time series and need to test for stationarity. Both series have structural breaks, possibly more than one. My procedure is as follows: Clemente Montanes ...
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4answers
178 views