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

[John Frain]

Without knowing something about the nature of your data and the
purpose of your analysis this is a hard question to answer.  Do you
have an underlying theory agout the behaviour of your series?   If
that theory implies a unit root then and ADF type test (probably an
ERS test, as recommended by Mat)  is an appropriate choice.  If theory
says that the series is stationary then the KPSS test is an
appropriate test of the null of stationarity.  There are, of course,
non-stationary series that do not have a unit root.  It is nice if ADF
and KPSS tests lead to the same conclusion but there is no
contradiction if this does not happen.

Maddala and Kim (1998), Unit Roots Cointegration and Structural
Change, Cambridge University Press, is a good suvey of the theory of
unit roots etc.

Leybourne and McCabe (1989) shows how certain revisions to the KPSS
test can make the results of the ADF and KPSS test more consistent.

John




2010/1/1 KAUSHIK BHATTACHARJEE <kabonline07 at yahoo.com>:
> 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?
>
> Kaushik Bhattacharjee
>
>
>
>
>        [[alternative HTML version deleted]]
>
>
> _______________________________________________
> R-SIG-Finance at stat.math.ethz.ch mailing list
> https://stat.ethz.ch/mailman/listinfo/r-sig-finance
> -- Subscriber-posting only. If you want to post, subscribe first.
> -- Also note that this is not the r-help list where general R questions should go.
>



-- 
John C Frain, Ph.D.
Trinity College Dublin
Dublin 2
Ireland
www.tcd.ie/Economics/staff/frainj/home.htm
mailto:frainj at tcd.ie
mailto:frainj at gmail.com