I see the type parameter for Phillips & Ouliaris Cointegration Test in the
urca package that should be Pz or Pu. I read the details, but I don't understand what type is useful for me. If I wanted to check the cointegration with that method for two series of stock prices, what type would be better?
In other words, what does the following mean?
The test "Pz", compared to the test "Pu", has the advantage that it is invariant to the normalization of the cointegration vector, i.e. it does not matter which variable is on the left hand side of the equation. In case convergence problems are encountered by matrix inversion, one can pass a higher tolerance level via "tol=..." to the solve()-function.