The Usefulness of Unit Root Tests in Selecting a Forecast Model
The aim of this paper is to show the usefulness of most frequently applied unit root test, i.e. augmented Dickey-Fuller test (ADF) or Said-Dickey test in selecting TS and DS model for forecasting purposes, especially in the cases when unit root processes and trend stationary processes are near observationally equivalent. The attention will focus on unit root processes in their autoregressive structure, therefore, in the second part of this paper the notion of unit root process which is near stationary (or near trend stationary) and the consequences of near equivalence for testing will be presented. In the third part the results of a simulation experiment which investigated the usefulness of ADF test in selecting the DS or TS model for forecasting will be depicted.(fragment of text)
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