Solved – the implication of unit root of MA

moving averagetime seriesunit root

A ARMA(p,q) process is weakly stationary, iff the root of its AR part is not on the unit circle. So its weak stationarity doesn't depend on its MA part.
But what can the positions of the roots of its MA part imply?

In the unit root tests for ARIMA, a unit root of the MA polynomial indicates that the data were overdifferenced. Does it mean that the differenced time series is not weakly stationary? If yes, does it contradict to the earlier fact that the weak stationarity of ARMA doesn't depend on its MA part?

Best Answer

If the roots of the MA process indicate a violation this can be due to a variety of causes;

  1. Over-differencing of Y
  2. Redundancy of the AR and MA structure
  3. Omitted deterministic variables ( Pulses/Level Shifts/Seasonal Pulses/Local time trends
  4. Incorrect Power Transformation
  5. Changes in parameters over time
  6. Changes in error variance over time
  7. Omission of user-specified causal variables

Hope this helps ...why model identification is not " a walk in the woods " and shouldn't be accomplished using simp[le-minded AIC/BIC tests but rather aggressively/comprehensively formulated.