Discrimination between deterministic trend and stochastic trend processes

Jorge Caiado and Nuno Crato (ncrato@iseg.ulisboa.pt)

MPRA Paper from University Library of Munich, Germany

Abstract: Most of economic and financial time series have a nonstationary behavior. There are different types of nonstationary processes, such as those with stochastic trend and those with deterministic trend. In practice, it can be quite difficult to distinguish between the two processes. In this paper, we compare random walk and determinist trend processes using sample autocorrelation, sample partial autocorrelation and periodogram based metrics.

Keywords: Autocorrelation; Classification; Determinist trend; Kullback-Leibler; Periodogram; Stochastic trend; Time series (search for similar items in EconPapers)
JEL-codes: C19 C32 (search for similar items in EconPapers)
Date: 2005
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