Stationary Time Series by Differencing


Where do I use the differencing function to obtain a stationary time series?


Many time series (e.g., financial prices time series) exhibit random walk (unit-root) phenomena, causing the time series to exhibit upward/downward trends over time.  Using a difference (DIFF(.)) function on this time series extracts the unit root and leaves a stationary process suitable for further analysis and modeling.



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