[Gretl-users] None-uniform distribution of the p-value from ADF test in gretl when there is an intercept & trend? (Allin Cottrell)

On Fri, 26 Apr 2019, Sven Schreiber wrote: >>> cheers >>> sven >>> =20 >> =20 >> Thanks Sven, >> But I=E2=80=99m more confused. >> If you are right, then what does the option "--ct (with constant and=20 >> trend)=E2=80=9D as stated in gretl's documentation mean for ADF test? >> If I set both the intercept and trend parameters to 0.1, doesn=E2=80=99= t the option=20 >> =E2=80=9C--ct=E2=80=9D in DGP become >> y(t)=3D0.1 + 0.1*t + y(t-1)+ e ? > > In the unit root case the DGP and the test equation are not the same as > regards the included terms. That's because of the implicit cumulation o= f > exogenous terms in the DGP. The ADF test options refer to the test > equation, not to the DGP equation (under H0). > > This is a general property and not specific to gretl. And the practical implication is that for Fred's DGP, y(t)=3D0.1 + 0.1*t + y(t-1)+ e where the 0.1*t cumulates, the adf-test option that should yield a=20 uniformly distributed p-value is --ctt (constant and quadratic trend). Allin