p-value differences in ADF test

For econometric discussions not necessarily related to EViews.

Moderators: EViews Gareth, EViews Moderator

JosePerles
Posts: 6
Joined: Thu Jul 05, 2012 8:18 am

p-value differences in ADF test

Postby JosePerles » Thu Jul 05, 2012 8:22 am

Good morning:

My name is José Perles. I'm researcher of the University of Alicante (Spain) Applied Economics Analysis Department (Honorific Collaborator at this moment).

I'm doing a unit root test ADF with Gretl, R and Eviews on a serie of tourism market share of Spain specified with constant and trend.

By comparing the results with Eviews or R (package fUnitRoot) I get the same t-statistic, but although all programs indicate that the critical values ​​are McKinnon (1996) MacKinnon, J. G. (1996) "Numerical distribution functions for unit root and cointegration tests", Journal of Applied Econometrics 11: 601-618 p-values ​​of the test are very different in either case .
Gretl: t = -3.62 p-value 0.02 asymptotic
Eviews t = -3.62 p-value (one-sided) = 0.04 which is the same value obtained in R.
I know that obtain similar values with different software is very strange. But this difference is normal?
At what may be due, one side p-value of Eviews or fUnitRoots are for finite sample, or Gretl p-value is two-sided?

Thanks in advance and sorry for any inconvenience.

José F. Perles
University of Alicante
Spain

EViews Glenn
EViews Developer
Posts: 2671
Joined: Wed Oct 15, 2008 9:17 am

Re: p-value differences in ADF test

Postby EViews Glenn » Fri Jul 06, 2012 10:42 am

I believe that it should be a one-sided test.

ysharipov
Posts: 2
Joined: Fri Jul 06, 2012 3:49 pm

Re: p-value differences in ADF test

Postby ysharipov » Fri Jul 06, 2012 4:11 pm

As far as I know p-value in ADF is for one sided test
for two sided test you should use t-values

JosePerles
Posts: 6
Joined: Thu Jul 05, 2012 8:18 am

Re: p-value differences in ADF test

Postby JosePerles » Mon Jul 09, 2012 12:40 am

Investigating a more litle, I have found that the difference is due that Gretl uses the asymptotic critical value of MacKinnon (1996) and Eviews and fUnitRoots R-Package gives the critical value of response surface for finite samples. However, the article of MacKinnon (1996) suggests (if I understand correctly), that the values ​​computed for finite sample, it should only be counted only in the DF test and not for ADF augmented as the Eviews ago. Is this correct?.

JosePerles
Posts: 6
Joined: Thu Jul 05, 2012 8:18 am

Re: p-value differences in ADF test

Postby JosePerles » Mon Jul 09, 2012 12:42 am

Investigating a more litle, I have found that the difference is due that Gretl uses the asymptotic critical value of MacKinnon (1996) and Eviews and fUnitRoots R-Package gives the critical value of response surface for finite samples. However, the article of MacKinnon (1996) suggests (if I understand correctly), that the values ​​computed for finite sample, it should only be used only in the DF test and not for ADF augmented as is done in Eviews. Is this correct?.

EViews Glenn
EViews Developer
Posts: 2671
Joined: Wed Oct 15, 2008 9:17 am

Re: p-value differences in ADF test

Postby EViews Glenn » Mon Jul 09, 2012 11:54 am

Your reading of MacKinnon's comment about finite sample ADF values is generally correct, though there is no evidence presented that they are better or worse than the asymptotic values for the t-stat. I will point out that the one case (z-stat) where MacKinnon strongly cautions against using the finite sample values is not a test statistic that EVIews produces for the ADF (though we do report related tests in the cointegration context -- perhaps in this case we shouldn't...). I think that the jury is still out on whether the t-statistic finite sample or asymptotic values are better.

To provide some context, the basic idea is that that the finite sample critical values are based on a set of simulations for which MacKinnon did not employ ADF regressions. Were he to have run some with ADF corrections he might very well have found that the finite sample DF results were closer than the asymptotic results in some cases (but understandably he did not run those simulations as the number of simulations that he did run is already quite large and it is not clear the best way to set up the correlation structure for evaluating the test statistics).

The most compelling argument for continuing to use the finite sample values for the ADF is, I think, one of comparability. One concern with switching over to the asymptotic values for ADF tests is that if you were to run a DF test for a smallish sample and then add a single ADF lag, you are more likely to get quite different results if we were to switch to using the asymptotic values--and in the absence of simulation results it is not clear whether this is a good or a bad thing. It would then be difficult to evaluate whether the difference in results is the result of the autocorrelation correction or the result of different critical values (or both). With either the finite sample or asymptotic choice, one is in a bit of a bind in the absence of finite sample simulations. By sticking with the finite sample values we are at least holding one thing somewhat constant...this may or may not be better...

As I write this, it occurs to me that one possibility would be to report both values. That has it's own set of issues but would then allow users to pick what they want to evaluate. I'll put it on a list of things to consider.


Return to “Econometric Discussions”

Who is online

Users browsing this forum: No registered users and 29 guests