Wikipedia / Unit root test
Wikipedia / Unit root test
In statistics, a unit root test tests whether a time series variable is non-stationary and possesses a unit root. The null hypothesis is generally defined as the presence of a unit root and the alternative hypothesis is either stationarity, trend stationarity or explosive root depending on the test used.
General approach
can be written as,
where,
is the deterministic component (trend, seasonal component, etc.)
is the stochastic component.
is the stationary error process.
The task of the test is to determine whether the stochastic component contains a unit root or is stationary.
Main tests
Other popular tests include:
this is valid in large samples.
here the null hypothesis is trend stationarity rather than the presence of a unit root.
Unit root tests are closely linked to serial correlation tests. However, while all processes with a unit root will exhibit serial correlation, not all serially correlated time series will have a unit root. Popular serial correlation tests include: