The authors' paper about the method (Hyndman and Khandakar 2008) states that an extended an extended Canova-Hansen test is used, although the helpfile updates this to say than an OCSB test is used.
I have two questions, therefore:
- What is an OCSB test?
- Is the method of determining seasonal differencing the same for regression with ARIMA errors as it is for ARIMA modelling with no covariates?
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Best Answer
OCSB test: Osborn DR, Chui APL, Smith J, and Birchenhall CR (1988) "Seasonality and the order of integration for consumption", Oxford Bulletin of Economics and Statistics 50(4):361-377.
The change in the algorithm is explained at http://robjhyndman.com/researchtips/forecast3/
When regressors are used,
auto.arima()fits the linear model usinglm()and applies the unit root tests to the residuals.
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