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


From   Ihtesham Afzal <ihtesham_afzal@hotmail.co.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   RE: st: Appropriate lags for Augmented Dickey-Fuller Test
Date   Thu, 27 Aug 2009 16:11:54 +0100

Thanks again for your reply.
I think I will use the dfuller, lags(#) command as I think that is sufficient for the test I am lookinf to do
Just one question though. I was made aware that I dont need to include a lags(#) term for the Phillips-Perron test does not need the lagged values.
Is this correct?
Thank you
Regards
Ihtesham
----------------------------------------
> Date: Thu, 27 Aug 2009 13:58:57 +0100
> Subject: Re: st: Appropriate lags for Augmented Dickey-Fuller Test
> From: tirthankar.chakravarty@gmail.com
> To: statalist@hsphsun2.harvard.edu
>
> 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 :
>> 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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>>>
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>
>
> --
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> 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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