[R-SIG-Finance] [R-sig-finance] A question on Unit root
bogaso.christofer at gmail.com
Mon Jan 12 02:12:19 CET 2009
In my textbook, I read that for a Integrated with order 1 process, there
would be atleast one unit root. But if I take following DGP : y[t] =
1.001y[t-1] + epsilon then what I found was, this is a Integrated with order
1 process, because, data generated from this process becomes stationary
after 1 difference. However there is, strictly speaking, no unit root. The
Ch. polynomial has root as 0.999001, this is not exactly one.Or I should
consider 0.999001 as 1?
Can you give a better clarification pls?
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