What is unit root in ADF test?

What does this mean to us? The presence of a unit root means the time series is non-stationary. Besides, the number of unit roots contained in the series corresponds to the number of differencing operations required to make the series stationary.

How does ADF test work?

In statistics and econometrics, an augmented Dickey–Fuller test (ADF) tests the null hypothesis that a unit root is present in a time series sample. The more negative it is, the stronger the rejection of the hypothesis that there is a unit root at some level of confidence.

How are unit root tests used in EViews?

The unit root tests that EViews provides generally test the null hypothesis against the one-sided alternative . In some cases, the null is tested against a point alternative. In contrast, the KPSS Lagrange Multiplier test evaluates the null of against the alternative .

How to run an ADF unit root test for multiple series?

It looks, in the workfile you posted at least, as though firms are your cross-sections. Perform the Panel Unit Root test with the Im-Pesaran-Shin method, which will show you the intermediate results for each cross section (firm).

What is the statistic value for ADF in EViews?

The ADF statistic value is -1.417 and the associated one-sided p-value (for a test with 221 observations) is.573. In addition, EViews reports the critical values at the 1%, 5% and 10% levels. Notice here that the statistic value is greater than the critical values so that we do not reject the null at conventional test sizes.

What is the output of the EViews test?

EViews reports the test statistic along with output from the corresponding test regression. For these tests, EViews reports the uncorrected estimate of the residual variance and the estimate of the frequency zero spectrum (labeled as the “HAC corrected variance”) in addition to the basic output.