Unit Root Testing

Unit root testing is a statistical method used to determine whether a time series data, such as economic indicators or stock prices, is stable over time or exhibits trends like persistent growth or fluctuations. If a series has a unit root, it suggests that shocks to the data have a lasting impact, making it non-stationary. Conversely, no unit root indicates the data is stationary, meaning its statistical properties are consistent over time. This test helps analysts decide appropriate modeling techniques and understand long-term characteristics of time-dependent data.