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A Primer for Unit Root TestingAn Introduction to Random Walks

A Primer for Unit Root Testing: An Introduction to Random Walks [This chapter introduces the idea of a random walk. In the first section, the emphasis is on the probability background of the random walk. It introduces the classic two-dimensional walk, primarily through the fiction of a gambler, which can be illustrated graphically. This serves two purposes, it underlies the motivation for the sample paths taken by some economic times series and it serves to introduce the partial sum (the gambler’s winnings), which is a critical quantity in subsequent econometric analysis. Some economic examples are given that confirm the likely importance of the random walk as an appropriate model for some economic processes.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

A Primer for Unit Root TestingAn Introduction to Random Walks

Part of the Palgrave Texts in Econometrics Book Series
Patterson, Kerry
Springer Journals — Nov 12, 2015
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30 pages

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Publisher
Palgrave Macmillan UK
Copyright
© Palgrave Macmillan, a division of Macmillan Publishers Limited 2010
ISBN
978-1-4039-0205-4
Pages
129 –159
DOI
10.1057/9780230248458_5
Publisher site
See Chapter on Publisher Site

Abstract

[This chapter introduces the idea of a random walk. In the first section, the emphasis is on the probability background of the random walk. It introduces the classic two-dimensional walk, primarily through the fiction of a gambler, which can be illustrated graphically. This serves two purposes, it underlies the motivation for the sample paths taken by some economic times series and it serves to introduce the partial sum (the gambler’s winnings), which is a critical quantity in subsequent econometric analysis. Some economic examples are given that confirm the likely importance of the random walk as an appropriate model for some economic processes.]

Published: Nov 12, 2015

Keywords: Exchange Rate; Random Walk; Unit Root; Random Walk Process; Economic Time Series

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