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What is the difference between KPSS and ADF test?
So in summary, the ADF test has an alternate hypothesis of linear or difference stationary, while the KPSS test identifies trend-stationarity in a series.
What is the null hypothesis for the KPSS test?
The null hypothesis for the KPSS test is that the data are stationary. For this test, we do NOT want to reject the null hypothesis. In other words, we want the p-value to be greater than 0.05 not less than 0.05.
Why KPSS test is used?
In econometrics, Kwiatkowski–Phillips–Schmidt–Shin (KPSS) tests are used for testing a null hypothesis that an observable time series is stationary around a deterministic trend (i.e. trend-stationary) against the alternative of a unit root.
What is KPSS unit root test?
The KPSS test, short for, Kwiatkowski-Phillips-Schmidt-Shin (KPSS), is a type of Unit root test that tests for the stationarity of a given series around a deterministic trend. In other words, the test is somewhat similar in spirit with the ADF test.
What are the results of the KPSS test?
The KPSS tests gives the following results – test statistic, p value and the critical value at 1%, 5% , and 10% confidence intervals. KPSS test is now applied on the data. [8]: kpss_test(sunspots[‘SUNACTIVITY’]) Results of KPSS Test: Test Statistic 0.669866 p-value 0.016285 Lags Used 7.000000 Critical Value (10%) 0.347000 Critical Value (5%)
When does the KPSS test reject the null hypothesis?
In order to reject the null hypothesis, the test statistic should be greater than the provided critical values. If it is in fact higher than the target critical value, then that should automatically reflect in a low p-value. That is, if the p-value is less than 0.05, the kpss statistic will be greater than the 5% critical value.
When does the KPSS statistic exceed the critical value?
That is, if the p-value is less than 0.05, the kpss statistic will be greater than the 5% critical value. Finally, the number of lags reported is the number of lags of the series that was actually used by the model equation of the kpss test. By default, the statsmodels kpss() uses the ‘legacy’ method.
How to turn on stationarity test in KPSS?
KPSS test around a deterministic trend In KPSS test, to turn ON the stationarity testing around a trend, you need to explicitly pass the regression=’ct’ parameter to the kpss. Now clearly, the p-value is so high that you cannot reject the null hypothesis. So the series is stationary.