tag:blogger.com,1999:blog-2198942534740642384.post318487181869940234..comments2023-10-24T03:16:41.009-07:00Comments on Econometrics Beat: Dave Giles' Blog: Snakes in a RoomDave Gileshttp://www.blogger.com/profile/05389606956062019445noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2198942534740642384.post-54988704229955676512016-11-06T10:52:27.526-08:002016-11-06T10:52:27.526-08:00Great post and an even greater analogy!
If I may...Great post and an even greater analogy!<br /> <br />If I may add, in Maddala and Kim's "Unit Roots, Cointegration and Structural Breaks" there is an excellent (and perhaps dated) discussion on what they call "confirmatory analysis" (Section 4.6 on page 126), that is exactly what the above post is about. <br /><br />Referencing to a paper by Bruke (1994), Madalla and Kim conclude that:<br /><br />"The overall conclusion is that if the true model is stationary, the <br />proportion of correct confirmations is low. It is thus, more important <br />to consider better unit root tests and stationary tests (as discussed in <br />section 4.3-4.5) than to use confirmatory analysis with defective tests."<br /><br />Prof. Giles, can you please inform us what the up-to-date literature has to say about this issue? <br />Itamarhttps://www.blogger.com/profile/13545727099157741150noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-351138378551525582016-11-06T06:21:12.554-08:002016-11-06T06:21:12.554-08:00That's what I'd do, for the most part. The...That's what I'd do, for the most part. The loss structure here is somewhat asymmetric - the "costs" of failing to detect a unit root are generally higher than those associated with "detecting" one when really the data are stationary.Dave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-78743184516727267252016-11-06T06:18:49.330-08:002016-11-06T06:18:49.330-08:00Thanks. Yes, there's quite a literature on tha...Thanks. Yes, there's quite a literature on that - Peter Phillips had some work. I'll check out the references and post them.Dave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-21776841055273125712016-11-06T01:55:00.257-08:002016-11-06T01:55:00.257-08:00The general rule is that two independent tests are...The general rule is that two independent tests are more reliable than one -- and in fact, the more independent tests we have, the more robust our conclusion if they lead to the same conclusion. There comes a point of diminishing returns. The cost (opportunity or otherwise) of another test may not be worth is.<br /><br />I'm not sure how good the snake example is. For one, the two tests aren't truly independent. They'd be more independent if two different persons performed both the two different tests. Then the tests depend on one's reliability in distinguishing between venomous and nonvenomous snakes.<br /><br />In that last issue, one really wants to know how or why the snakes got there. For example, if the snakes are known to be indigenous to the US, a large black snake is pretty much guaranteed to be harmless (and a nice pet, to boot). However, I would not bet my life on the large black snake not being a black mamba imported from Africa, or some other deadly species.<br /><br />One should take a third option, and hire a pest removal service with snake expertise. Or take a fourth option and stay out of the room.Anonymoushttps://www.blogger.com/profile/00675285078365079729noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-57023989931487857572016-11-06T00:37:25.002-07:002016-11-06T00:37:25.002-07:00Really a nice post, Sir. However, in your many blo...Really a nice post, Sir. However, in your many blog posts you have clarified this and explained many times the rationale of doing two tests. One thing, if two tests give conflicting results would it be safe to conclude that series X is I(1)? <br />Thank you.Santosh Dashhttps://www.blogger.com/profile/02016226999263087762noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-3300566077531694402016-11-05T23:02:44.466-07:002016-11-05T23:02:44.466-07:00Such a wonderful analogy there, Professor.
But I ...Such a wonderful analogy there, Professor. <br />But I still ask if there are Bayesian methods of unit root test and their relative unit root models?Mallam Nurahttps://www.blogger.com/profile/03427954476142359195noreply@blogger.com