[R] Re: R-help Digest V2 #710

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From: Adrian Trapletti (adrian.trapletti@lmttrading.com)
Date: Tue 23 Apr 2002 - 17:20:45 EST 

Message-id: <3CC50B4D.7E09DC5E@lmttrading.com>

> Date: Mon, 22 Apr 2002 07:21:41 +0000
> From: "sonchawan tamkaew" <psu17772@hotmail.com>
> Subject: [R] PP.test
>
> Hello there,
>
> I would like to know whether PP.test from library(ts) is appropriate to test
> unit root in financial data (daily)?
>
> Thank you for your help.
>
> Sonchawan
>

In principle yes. However, it is by now a well know fact that the PP test has severe size distortions for certain processes (e.g. integrated MA(1)). A more robust alternative in some situations is the Augmented-Dickey-Fuller test which is provided by tseries (see adf.test).

best
Adrian

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