The asymptotic power envelope is derived for point-optimal tests of a
unit root in the autoregressive representation of a Gaussian time seri
es under various trend specifications. We propose a family of tests wh
ose asymptotic power functions are tangent to the power envelope at on
e point and are never far below the envelope. When the series has no d
eterministic component, some previously proposed tests are shown to be
asymptotically equivalent to members of this family. When the series
has an unknown mean or linear trend, commonly used tests are found to
be dominated by members of the family of point-optimal invariant tests
. We propose a modified version of the Dickey-Fuller t test which has
substantially improved power when an unknown mean or trend is present.
A Monte Carlo experiment indicates that the modified test works well
in small samples.