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Multiple Time Series Modeling Using the SAS VARMAX Procedure by Anders Milhoj

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Chapter 5: Tests for Differencing Time Series

Introduction

Stationarity

Unit Roots

Dickey-Fuller Tests for Unit Roots

Simple Applications of the Dickey-Fuller Test

Augmented Dickey-Fuller Tests for Milk Production

KPSS Unit Root Tests

An Application of the KPSS Unit Root Test

Seasonal Differencing

Conclusion

Introduction

This chapter describes how to test for unit roots in order to judge whether a first-order differencing is necessary to obtain stationarity. In time series theory, stationarity is a clear advantage. Most series with a trending behavior are transformed into stationarity when differences are made. From an intuitive viewpoint, this method also clearly points toward real relationships because changes in the series are modeled by changes ...

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