Basic Properties of Stationary First-Order Autoregressive Processes and Random Walks

Victoria Univ. of Technology Working Paper No. 1/00

16 Pages Posted: 6 Nov 2001

See all articles by Laszlo Konya

Laszlo Konya

La Trobe University - School of Economics

Date Written: February 2000

Abstract

This paper compares the basic properties of stationary autoregressive processes and random walks with special regard to their implications to unit root testing. In particular, it aims to answer three basic but important questions. Firstly: 'What do a constant term (drift) and a linear time trend mean in stationary first-order autoregressive equations and in random walks?'. Secondly: 'Can bounded series be modelled by random walk processes?'. Thirdly: 'Is there any difference between having a unit root in the level or in the logarithm of an economic time series?'.

Keywords: First-order autoregressive process, unit root

JEL Classification: C22

Suggested Citation

Konya, Laszlo, Basic Properties of Stationary First-Order Autoregressive Processes and Random Walks (February 2000). Victoria Univ. of Technology Working Paper No. 1/00, Available at SSRN: https://ssrn.com/abstract=289280 or http://dx.doi.org/10.2139/ssrn.289280

Laszlo Konya (Contact Author)

La Trobe University - School of Economics ( email )

Bundoora, Victoria 3086
Australia

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