ADF-test for unit root, how to choose maxlag?

[Arlec]

Hi there!


When I conduct an ADF test for unit root on a time series variable with 21 observations, I get the result I(2) with the SIC and standard maxlag=4 in Eviews 5. If I change the maxlag to less than 4 I get the result I(0). How is this possible, how does this work?

I(2) with SIC, maxlag=4, using 0 lag
I(0) with SIC, maxlag <4, using 1 lag

Off course I would prefer the latter case since I am going to continue with cointegration testing but is this little “trick” really applicable? How does this affect the power of the test?

Help would very much indeed be appreciated!
Arlec

[EViews Glenn]

See the related discussion in the forum topic

http://forums.eviews.com/viewtopic.php? ... rron#p1654