Lecture 5: Unit Roots and Staionarity

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Questions and Answers

What is the DF Test used for?

To determine if a time series is stationary or not

What is the DF test used for?

Determining if a time series is stationary or not

What is the DF Test used for?

To determine if a time series is stationary or not

What is the formula for the DF Test Statistic?

t = u/∆y Signup and view all the answers

What does the symbol t represent in the formula for the test statistic?

Test statistic Signup and view all the answers

What is the formula for the DF Test Statistic?

t = u/∆y Signup and view all the answers

What is the ADF test used for?

Determining if a time series is stationary or not Signup and view all the answers

What does the symbol t represent in the DF Test Statistic Formula?

The test statistic Signup and view all the answers

What does the symbol t represent in the DF Test Statistic Formula?

The test statistic Signup and view all the answers

What is the purpose of the DF Test Statistic formula?

To test hypotheses in statistical analysis Signup and view all the answers

What is the purpose of the DF Test Statistic formula?

To test hypotheses in statistical analysis Signup and view all the answers

What is the Phillips-Perron test?

A test for stationarity Signup and view all the answers

What is the optimal number of lags determined by in the ADF test?

Information criteria Signup and view all the answers

What type of differences in variables does the DF Test Statistic formula involve?

Differences in variables Signup and view all the answers

What is the KPSS test used for?

Determining if a time series is stationary or not Signup and view all the answers

What type of differences in variables does the DF Test Statistic formula involve?

Differences in variables Signup and view all the answers

What does the DF Test Statistic formula involve dividing by?

A measure of variability Signup and view all the answers

What does the DF Test Statistic formula involve dividing by?

A measure of variability Signup and view all the answers

What is the power of the DF and Phillips-Perron tests low for?

A stationary process with a root close to the non-stationary boundary Signup and view all the answers

In what type of statistical analysis is the DF Test Statistic used?

Inferential statistics Signup and view all the answers

In what type of statistical analysis is the DF Test Statistic used?

Inferential statistics Signup and view all the answers

What is the t-ratio used for in the DF test?

To estimate regression Signup and view all the answers

What is the ADF Test used for?

To determine if a time series is stationary or not Signup and view all the answers

What is the ADF Test used for?

To determine if a time series is stationary or not Signup and view all the answers

What does the ADF test use to augment the DF test?

Lags of the dependent variable Signup and view all the answers

What is the Phillips-Perron test and how is it different from the ADF Test?

It is a test for stationarity that incorporates an automatic correction for autocorrelated residuals Signup and view all the answers

What is the Phillips-Perron test and how is it different from the ADF Test?

It is a test for stationarity that incorporates an automatic correction for autocorrelated residuals Signup and view all the answers

How many possible outcomes are there when comparing the results of the DF/PP and stationarity tests?

Four Signup and view all the answers

Study Notes

The text discusses computing the DF Test Statistic.
The formula for the test statistic involves ∆y and u.
The symbol t represents the test statistic.
The formula is used in statistical analysis.
The test statistic is used to test hypotheses.
The formula involves differences in variables.
The formula involves dividing by a measure of variability.
The test statistic is used in regression analysis.
The formula is a key component in statistical modeling.
The formula is used to determine the significance of relationships between variables.
The ∆y t is a measure of change in y over time.
The DF test is used to determine if a time series is stationary or not.
The test is based on the t-ratio on the y t-1 term in the estimated regression of ∆y t on y t-1.
The ADF test is used to augment the DF test by using lags of the dependent variable.
The optimal number of lags can be determined using the frequency of the data or information criteria.
Higher orders of integration can be tested using the ADF test.
The Phillips-Perron test is similar to the ADF test but incorporates an automatic correction for autocorrelated residuals.
The power of the DF and Phillips-Perron tests is low if the process is stationary but with a root close to the non-stationary boundary.
Stationarity tests, such as the KPSS test, can be used in conjunction with the ADF/PP procedure.
There are four possible outcomes when comparing the results of the DF/PP and stationarity tests.