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Discrimination between deterministic trend and stochastic trend processes

Author

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  • Caiado, Jorge
  • Crato, Nuno

Abstract

Most of economic and financial time series have a nonstationary behavior. There are different types of nonstationary processes, such as those with stochastic trend and those with deterministic trend. In practice, it can be quite difficult to distinguish between the two processes. In this paper, we compare random walk and determinist trend processes using sample autocorrelation, sample partial autocorrelation and periodogram based metrics.

Suggested Citation

  • Caiado, Jorge & Crato, Nuno, 2005. "Discrimination between deterministic trend and stochastic trend processes," MPRA Paper 2076, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:2076
    as

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    File URL: https://mpra.ub.uni-muenchen.de/2076/1/MPRA_paper_2076.pdf
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    References listed on IDEAS

    as
    1. Maharaj, Elizabeth Ann, 2002. "Comparison of non-stationary time series in the frequency domain," Computational Statistics & Data Analysis, Elsevier, vol. 40(1), pages 131-141, July.
    2. Caiado, Jorge & Crato, Nuno & Pena, Daniel, 2006. "A periodogram-based metric for time series classification," Computational Statistics & Data Analysis, Elsevier, vol. 50(10), pages 2668-2684, June.
    3. Domenico Piccolo, 1990. "A Distance Measure For Classifying Arima Models," Journal of Time Series Analysis, Wiley Blackwell, vol. 11(2), pages 153-164, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Autocorrelation; Classification; Determinist trend; Kullback-Leibler; Periodogram; Stochastic trend; Time series;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other

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