Dear Researchers,
I have time series data & I’m running OLS regression on Stata.
I want to de-trend a variable while taking into consideration that the trend is stochastic not linear. This is the code I found while searching but I’m not sure if it treats the trend as stochastic:
reg x time
predict x_detrended, resid
In fact, when I plotted the detrended series (x_detrended) with the time variable (quarter in my case) to see the trend, the extracted trend seems to be linear not stochastic. I’m attaching the graph below.
So, I want to know the command on Stata that detrend the series given a stochastic trend not linear.
I will appreciate your help.
Thank you very much
Doesn’t look like a stochastic trend to me but anyways:
you can fit a state space model with a stochastic trend using the sspace function.
what you fitted using ols is in fact a linear deterministic trend.
Actually I am not expert in stata, but I suggest you to use seasonal differencing to detrend your data.
I guess you can use some filter methods such as Hodrik - Prescott filter. Search for tsfilter in Stata.
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