ADF-test for unit root, how to choose maxlag?
Posted: Thu Jul 23, 2009 6:39 am
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
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