[R-SIG-Finance] Which one is better?

[Patrick Burns]

I suspect this is asking the wrong question
of the data.  I don't know what the right
questions are, but they should be in the
direction of where ever you want to go.

mat wrote:
> KAUSHIK BHATTACHARJEE a écrit :
>> I have some time series .more than 1000 observations each ..I want to 
>> test if  they contain unit roots...
>> I am performing ADF as well as  KPSS tests...I am getting contraditory 
>> results in 7 out of 10 series....KPSS test is rejecting stationarity 
>> where as ADF test is not....
>> Which one is more reliable test...any idea/reference?
>>  
>>   
> any reference? Yes, the paper of KPSS! It is not too technical and in 
> the empirical part they discuss this issue of contradictory results with 
> unit roots tests (if I remember well there are five cases from the 
> Nelson Plosser data were KPSS is different than ADF, so that's a known 
> issue:-).
> 
> I would rather base on a unit root test (btw rather ERS than ADF) as the 
> KPSS test is rather considered as a "confirmatory test". Base on unit 
> root tests especially when both tests are rejected, as unit root tests 
> are known to have low power and rejection is then a pretty "big sign". 
> But note that their size is not so good neither, while KPSS can have 
> really big size distortions, try yourself:
> 
> library(urca)
> 
> simul.cval<-function(ar, n=100){
>  series<-arima.sim(model=list(ar=ar), n=n)
>  summary(ur.kpss(series, use.lag=1))@teststat
> }
> 
> mc<-replicate(500, simul.cval(ar=0.2))
> mean(mc>  0.463)
> 
> mc<-replicate(500, simul.cval(ar=0.9))
> mean(mc>  0.463)
> 
> Hope this helps
> 
> Mat
>> Kaushik Bhattacharjee
>>
>>
>>
>>           [[alternative HTML version deleted]]
>>
>>   
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