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DATA STATIONER AND DATA NON STATIONER

DATA STATIONER AND DATA NON STATIONER. Example- Real GDP (2000 Prices) Seasonally Adjusted. (1) Plot Time Series - Non-Stationary (i.e. time varying mean and correlogram non-zero). GDP. Time. r. k. These are Examples of Non-Stationary Time Series. Unit Root Testing.

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DATA STATIONER AND DATA NON STATIONER

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  1. DATA STATIONER AND DATA NON STATIONER

  2. Example- Real GDP (2000 Prices) Seasonally Adjusted • (1) Plot Time Series - Non-Stationary • (i.e. time varying mean and correlogram non-zero) GDP Time r k

  3. These are Examples of Non-Stationary Time Series

  4. Unit Root Testing • (1) Plot First Difference of Time Series - Stationary • (i.e. constant mean and correlogram zero) Time r k

  5. Informal Procedures to identify non-stationary processes • (2) Diagnostic test - Correlogram • Correlation between 1980 and 1980 + k. • For stationary process correlogram dies out rapidly. • Series has no memory. 1980 is not related to 1985.

  6. These are Examples of Stationary Time Series

  7. What is a Spurious Regression? A Spurious or Nonsensical relationship may result when one Non-stationary time series is regressed against one or more Non-stationary time series The best way to guard against Spurious Regressions is to check for “Cointegration” of the variables used in time series modeling

  8. Symptoms of Likely Presence of Spurious Regression • If the R2 of the regression is greater than the Durbin-Watson Statistic • If the residual series of the regression has a Unit Root

  9. What is a “Unit Root”? If a Non-Stationary Time Series Yt has to be “differenced” d times to make it stationary, then Yt is said to contain d “Unit Roots”. It is customary to denote Yt ~ I(d) which reads “Yt is integrated of order d”

  10. Unit Root Testing: Formal Tests to Establish Stationarity of Time Series • Dickey-Fuller (DF) Test • Augmented Dickey-Fuller (ADF) Test • Phillips-Perron (PP) Unit Root Test • Dickey-Pantula Unit Root Test • GLS Transformed Dickey-Fuller Test • ERS Point Optimal Test • KPSS Unit Root Test • Ng and Perron Test

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