Regression modelEconometrics / time series
Bayesian ADF Unit Root Test
The Bayesian Augmented Dickey-Fuller (BADF) unit root test re-frames the classical ADF test within a Bayesian framework. Rather than computing a frequentist p-value, it quantifies evidence for or against a unit root by comparing posterior probabilities or Bayes factors under the null (unit root) and alternative (stationarity) hypotheses, incorporating prior beliefs about the autoregressive parameter.
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Sources
- Sims, C. A., & Uhlig, H. (1991). Understanding unit rooters: A helicopter tour. Econometrica, 59(6), 1591–1599. DOI: 10.2307/2938280 ↗
- Koop, G., Osiewalski, J., & Steel, M. F. J. (1992). Bayesian analysis of long-run multipliers in cointegrating models. Journal of Econometrics, 54(1–3), 27–44. DOI: 10.1016/0304-4076(92)90100-O ↗