Hi all,
I was running the adf test in R.
CODE 1:
adf.test(data$LOSS)
Augmented Dickey-Fuller Test
data: data$LOSS
Dickey-Fuller = -1.9864, Lag order = 2, p-value = 0.5775
alternative hypothesis: stationary
CODE 2:
adf.test(diff(diff(data$LOSS)))
Augmented Dickey-Fuller Test
data: diff(diff(data$LOSS))
Dickey-Fuller = -6.9287, Lag order = 2, p-value = 0.01
alternative hypothesis: stationary
Is my interpretation correct:
The original data( in code 1) is not stationary
the twice differenced data (in code 2) is *stationary* and the order of the
corresponding ARMA(p,q) model are *p=2* (as lag order in the output is 2)
and *q=0*;.i.e. the *AR coefficients for X(t-1) and X(t-2) are significant*,
while those of X(t-3) onwards are insignificant.
Appreciate your help.
Thanks,
Preetam
--
Preetam Pal
(+91)-9432212774
M-Stat 2nd Year, Room No. N-114
Statistics Division, C.V.Raman
Hall
Indian Statistical Institute, B.H.O.S.
Kolkata.
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