20.a) Define the term 'unit root' and explain why it is important to test for unit root in time seriesdata before attempting to build an empirical model.b) A researcher wants to test for the presence of unit root in time-series data and decidesto use the Dickey-Fuller (DF) test. He estimates a regression of the formAyt = μ+ yt-1 + Utand obtains the estimate = -0.75 with standard error = 0.24i) Given the data, and a critical value of -2.88, perform the DF test. What are the nulland alternative hypotheses for this test? What is the main conclusion from this test?ii) Another researcher suggests that there may be a problem with this methodologysince it assumes that the disturbances are white noise. Suggest a possible sourceof difficulty and how the researcher might in practice get around it.

This question consists of two parts. In the first part, the concept of a unit root in time series…

Answered: a) Define the term 'unit root' and…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

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