Question #25
Reading: Reading 2 Time-Series Analysis
PDF File: Reading 2 Time-Series Analysis.pdf
Page: 11
Status: Unattempted
Correct Answer: B
Question
One choice a researcher can use to test for nonstationarity is to use a:
Answer Choices:
A. Breusch-Pagan test, which uses a modified t-statistic
B. Dickey-Fuller test, which uses a modified χ2 statistic
C. Dickey-Fuller test, which uses a modified t-statistic
Explanation
The Dickey-Fuller test estimates the equation (xt – xt-1) = b0 + (b1 - 1) * xt-1 + et and tests if
H0: (b1 – 1) = 0. Using a modified t-test, if it is found that (b1– 1) is not significantly
different from zero, then it is concluded that b1 must be equal to 1.0 and the series has a
unit root.