76. UNIT ROOT-Concepts, Significance, Meaning| Econometrics |Time Series variable(Describing trends)

#unitroot #econometrics #economicspedia
A unit root (also called a unit root process or a difference stationary process) is a stochastic trend in a time series, sometimes called a “random walk with drift”; If a time series has a unit root, it shows a systematic pattern that is unpredictable.
The reason why it’s called a unit root is because of the mathematics behind the process. At a basic level, a process can be written as a series of monomials (expressions with a single term). Each monomial corresponds to a root. If one of these roots is equal to 1, then that’s a unit root.

The math behind unit roots is beyond the scope of this site (although if you’re really interested you can read about it in this pdf). All you really need to know if you’re analyzing time series is that the existence of unit roots can cause your analysis to have serious issues like:

Spurious regressions: you could get high r-squared values even if the data is uncorrelated.
Errant behavior due to assumptions for analysis not being valid. For example, t-ratios will not follow a t-distribution.

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[aniketbhattacharya]

Hello ma'am! Again an awesome session from Economics Pedia. Thank you again.

[pedrocolangelo]

Thanks for such a great lecture! Your way of teaching makes so easy to understand such concepts.

Greetings from Brazil!

[paulcartwright]

Thank you for the lecture, it finaally makes sence

[lucianamateru]

thank you for making our economics lesson enjoyable . i have one request please do a presentation on Thirlwall law (1979) ( balance of payment constrained economic growth model please.

[santoshdas]

Thnkq so much mam for this topic plz mam make more vdo about econometric and do continues mam becz it is very helpful to understand.

[PrachiBaidya]

Ma'am how to understand if a series follows TSP or DSP?

[aditikap]

Hello Ma'am, the video was really helpful!! Could you please tell ne the full for of DSP method?

[sarthakjagtap]

maam please take lecture on lagged variable

[a.b.]

Which book you are following ma'am....!

[mustafizurrahman]

Please mam take class on AR, MA, ARMA, ARIMA. Detail lecture including theory will come handy for us