Unit root test: Difference between revisions

Revision as of 00:48, 6 June 2016

Revision as of 08:21, 6 June 2016

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</math> can be written as,

<math>y_t = TD_tD_t + z_t + \varepsilon_t </math>

where,

* <math>TD_tD_t

</math> is the deterministic component (trend, seasonal component, etc.)

* <math>\varepsilon_t

</math> is the stationary error process.

* <math>z_t

</math> is the stochastic component.

* <math>\varepsilon_t

</math> is the stationary error process.

The task of the test is to determine whether the stochastic component contains a unit root or is stationary.<ref>{{Citation |title=Elements of Time Series Econometrics: An Applied Approach|last1=Kočenda|first1=Evžen |last2= Alexandr| first2= Černý |publisher= [[Karolinum Press]] |year=2014|isbn=978-80-246-2315-3|pages=66}}.</ref>