This study material discusses correlograms and time-series stationarity. It includes plots of autocorrelations of oil prices between 1883 and 1970, as well as the results of the Kwiatkowski–Phillips–Schmidt–Shin (KPSS) test and the Augmented Dickey-Fuller test. The material concludes that the price of oil between 1883 and 1970 is stationary.
Contribute Materials
Your contribution can guide someone’s learning journey. Share your
documents today.
Correlograms and Time-Series Stationarity Question 2 Part (a) Based on the two correlogram plots below, we can tellthat the time series data is stationary. The two plots are generated in STATA using different command and the objective is to demonstrate the overall trend in the autocorrelations of Oil prices between 1883 and 1970. Plot 1 is provided below while plot 2 is given in the appendix. -0.500.000.501.00 Autocorrelations of Priceofoil 010203040 Lag Bartlett's formula for MA(q) 95% confidence bands Plot 1: Correlogram Generate for Price of Oil between 1883 and 1970 Part (b) The Kwiatkowski–Phillips–Schmidt–Shin (KPSS) test is a Unit test for stationarity. The null hypothesis is that the time series data is stationary. From the results indicated below (based on four augmentation term) we can conclude that the data is stationary. We will not reject the null hypothesis can state the Price of oil between 1883 and 1970 is stationary.
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
11.0466 10.0442 9.0429 8.0426 7.0432 6.0448 5.0478 4.0527 3.0601 2.0709 1.0924 0.155 LagorderTeststatistic 10%:0.1195%:0.1462.5%:0.1761%:0.216 CriticalvaluesforH0:Priceofoilistrendstationary AutocovariancesweightedbyBartlettkernel Maxlag=11chosenbySchwertcriterion KPSStestforPriceofoil Part (c) The Augmented Dickey-Fuller test is a Unit root test for non-stationarity. The null hypothesis is that the time series data is non-stationary, from the results indicated below the p-value is less than 0.05; as such, we will reject the null hypothesis and conclude that the price of oil between 1883 and 1970 is stationary. MacKinnonapproximatep-valueforZ(t)=0.0053 Z(t)-3.625-3.528-2.900-2.585 StatisticValueValueValue Test1%Critical5%Critical10%Critical InterpolatedDickey-Fuller Dickey-FullertestforunitrootNumberofobs=87 .dfullerPriceofoil,lags(0) Part (d)
Based on the results of Plot 3 and 4, we can state that first order difference for Price of Oil between 1883 and 1970 are stationary. With regard to order of integration, we can conclude that Price of Oil betwee 1883 and 1970 is intregate on both order 0 and 1 i.e. P(0) and P(1). -0.40-0.200.000.200.40 Autocorrelations of FDpriceofoil 010203040 Lag Bartlett's formula for MA(q) 95% confidence bands Plot 3: Correlogram for First Order Difference of PriceofOil Appendix Plot 2: Correlogram with figures Oil Pricesofoil