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Re: st: Appropriate lags for Augmented Dickey-Fuller Test


From   Tirthankar Chakravarty <tirthankar.chakravarty@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Appropriate lags for Augmented Dickey-Fuller Test
Date   Thu, 27 Aug 2009 13:58:57 +0100

Not really. -dfuller- provides what are called parametric augmented
Dickey-Fuller (ADF) tests, which require explicit specification of the
(linear) trend component. -dfgls- belongs to a class of efficient ADF
unit root tests, which involve running the ADF tests on
quasi-differenced series (wherby a trend is extracted by GLS
detrending) - leading, typically, to greater power properties.

In either case, -dfuller- does not include a trend by default and
-dfgls- does. So as you are using them, they are not comparable. For
quick diagnostics on unit roots, I prefer -dfgls-.

I can point you to the excellent exposition in Phillips and Xiao
(1998) & [TS] dfgls.

--- References ---
@article{phillips1998primer,
  title={{A Primer on Unit Root Testing}},
  author={Phillips, P.C.B. and Xiao, Z.},
  journal={Journal of Economic Surveys},
  volume={12},
  number={5},
  pages={423--470},
  year={1998},
  publisher={Blackwell Publishers Ltd}
}



2009/8/27 Ihtesham Afzal <ihtesham_afzal@hotmail.co.uk>:
> Hello, first of all, thanks for the reply.
> Here is the output. From this can I infer that the lags i should use is 14 (if I use the MAIC)and thus conduct the ADF test with 14 lags as I have done below?
> Is this the correct procedure.
> Kinds Regards.
> Ihtesham
>
>
> . dfgls lCPI
>
> DF-GLS for lCPI                                          Number of obs =   284
> Maxlag = 15 chosen by Schwert criterion
>
>               DF-GLS tau      1% Critical       5% Critical      10% Critical
>  [lags]     Test Statistic        Value             Value             Value
> ------------------------------------------------------------------------------
>    15           -0.614           -3.480            -2.815            -2.535
>    14           -0.659           -3.480            -2.823            -2.542
>    13           -0.787           -3.480            -2.830            -2.549
>    12           -1.235           -3.480            -2.838            -2.555
>    11           -0.351           -3.480            -2.845            -2.562
>    10           -0.285           -3.480            -2.851            -2.568
>    9            -0.223           -3.480            -2.858            -2.574
>    8            -0.327           -3.480            -2.865            -2.580
>    7            -0.381           -3.480            -2.871            -2.586
>    6            -0.457           -3.480            -2.877            -2.591
>    5            -0.254           -3.480            -2.883            -2.596
>    4            -0.164           -3.480            -2.888            -2.601
>    3            -0.084           -3.480            -2.894            -2.606
>    2            -0.233           -3.480            -2.899            -2.611
>    1            -0.206           -3.480            -2.903            -2.615
>
> Opt Lag (Ng-Perron seq t) = 13 with RMSE  .0030169
> Min SC   = -11.32856 at lag 13 with RMSE  .0030169
> Min MAIC = -11.51094 at lag 14 with RMSE   .003008
>
>
> . dfuller lCPI, lags(14)
> Augmented Dickey-Fuller test for unit root         Number of obs   =       285
>                               ---------- Interpolated Dickey-Fuller ---------
>                  Test         1% Critical       5% Critical      10% Critical
>               Statistic           Value             Value             Value
> ------------------------------------------------------------------------------
>  Z(t)             -1.980            -3.457            -2.879            -2.570
> ------------------------------------------------------------------------------
> MacKinnon approximate p-value for Z(t) = 0.2955
>
>
> ----------------------------------------
>> Date: Thu, 27 Aug 2009 12:59:34 +0100
>> Subject: Re: st: Appropriate lags for Augmented Dickey-Fuller Test
>> From: tirthankar.chakravarty@gmail.com
>> To: statalist@hsphsun2.harvard.edu
>>
>> <>
>> -dfgls- reports three different criteria for lag selection:
>>
>> 1) Ng-Perron
>> 2) Schwarz
>> 3) Modified AIC
>>
>> and reports tests upto a max. lag determined by the Schwert criteria.
>>
>> T
>>
>> On Thu, Aug 27, 2009 at 12:39 PM, Ihtesham
>> Afzal wrote:
>>> Hello.
>>> Just a quick question.
>>> When undergoing the Augmented Dickey Fuller Test, how do I decide on how many lags to include for each series?
>>> Do I estimate the AR(p) model with different p-lag values and then find the one with the lowest AIC/BIC value?
>>>
>>> Kind Regards.
>>>
>>> Ihtesham
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>>
>>
>>
>> --
>> To every ω-consistent recursive class κ of formulae there correspond
>> recursive class signs r, such that neither v Gen r nor Neg(v Gen r)
>> belongs to Flg(κ) (where v is the free variable of r).
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-- 
To every ω-consistent recursive class κ of formulae there correspond
recursive class signs r, such that neither v Gen r nor Neg(v Gen r)
belongs to Flg(κ) (where v is the free variable of r).

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