Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection

Alastair Hall

Journal of Business & Economic Statistics, 1994, vol. 12, issue 4, 461-70

Abstract: The author examines the impact of data based lag length estimation on the behavior of the augmented Dickey-Fuller (ADF) test for a unit root. He derives conditions under which the augmented Dickey-Fuller test converges to the Dickey-Fuller distribution and verify that these conditions are satisfied by many popular lag selection strategies. Simulation evidence indicates that the performance of the augmented Dickey-Fuller test is considerably improved when the lag length is selected from the data. An application to inventory series illustrates that inference about a unit root can be very sensitive to the method of lag-length selection.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:12:y:1994:i:4:p:461-70

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