Two or more non-stationary variables are cointegrated if there is a linear combination of those variables which is stationary.

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Testing for cointegration (basic)

How can I know if I have cointegration or not? What is my hypothesis and what are the results that I have to look at? ...
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Granger Causality test pre-conditions

I am trying to analyse the causation between individual stock returns and index returns. I have taken the log return values of both stock and index values. Unit root test suggest that the values are ...
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Critical values for Dickey-Fuller and Engle-Granger tests

I have two time series $\{X_t\}$ and $\{Y_t\}$ both of which contain thousands and sample data and I would like to test whether their stationarity and whether they are cointegrated. I plotted a ...
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Intepretation of Eigenvalues in Johansen Test

I am reading this tutorial on how to interpret Johansen Test result http://www.quantcode.com/modules/smartfaq/faq.php?faqid=103 The tutorial indicates that a significant Eigenvalue is required even ...
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How to use Cointegrated relationships from the Johansen Procedure?

I've been tasked with adjusting some time series to deal with possible non-stationarity and cointegration. The models are finding y~ x1,x2,x3,x4,x5,x6 The relationships are being modelled in a few ...
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Panel: Estimating cointegrating vector within ECM to test cointegration

In time-series analysis we were taught that one can test for cointegration by estimating an error correction model and testing whether the coefficient estimated to the deviation of the equilibrium ...
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Modelling in the presence of multiple cointegrating relationships

I am looking for some clarification regarding multivariable cointegration and what steps I should take to avoid spurious regressions. I am analysing a time series $y$ as a function of independent ...
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31 views

Is a trend-stationary variable I(1) or I(0)?

I am trying to do cointegration analysis between two variables. I first used the standard Dickey-Fuller and Phillips-Perron tests; they concluded my variables were I(1). I then did cointegration and ...
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23 views

can we use Engle-Granger test for cointegration when I have lags of dependent variable as explanatory variable in my model?

I want to check for cointegration test using Engle-Granger test for my model which is of the form: y= y(-1) + y(-2) + x1 + x2 + x3 Is Engle granger test suitable for such cases.
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Replicate cointegration rank statistics using a 9 variable VAR(2)

I am trying to replicate Tables 3 and 4 from the paper "A Long Run Structural Macroeconometric Model OF the UK" by Garratt et al (2003). Using the Akaike criterion the authors decide to proceed with ...
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Conflicting cointegration results due to different lags in Johansen procedure

I have been using two different models for cointegration: Johansen's test and ARDL (autoregressive distributed lag). I guess this example could be extendent for other cointegration models as well. I ...
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1answer
21 views

Cointegration Restrictions

If there are two I(1) series that are not cointegrated, why could it be that if I create a VECM and impose restrictions implying that they are cointegrated, that I cannot reject this restriction ...
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35 views

Model residuals pass stationarity test, but Durbin–Watson test fails

I have a OLS model that I try to prove it has cointegration between two regressors and the dependent variable. The model fits well, with a very high R-squared. The residuals don't seem to be ...
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28 views

Testing the expectations hypothesis in eviews (term structure)

I am testing this hypothesis in eviews, and have so far found the 3 and 6 month rates to be cointegrated using the Johansen test. This is the first condition for the EH to hold. The next is testing ...
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1answer
19 views

panel cointegration Westerlund test Pedroni cointegration test

My data is non stationary.So in order to check for cointegration i used westerlunds test but it showed not cointegrating relationships. But on doing a Pedronis cointegration test,it shows that there ...
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Making series cointegrated if they are not cointegrated?

I am fairly new to pairs trading. I was looking at a couple of series and testing whether they were cointegrated to see if I could apply a pairs trading strategy to them. I tested the series for ...
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25 views

Johansen Test - Full rank but variables are not I(0)

I have a model of four implied exchange rates which are based on stock prices denominated in two currencies. They should all be cointegrated based on the law of one price. Each of the series is ...
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Imposing restrictions in vecm in R [migrated]

Respected group members. I am trying to test some restrictions in vecm in R but having some problems in the same. I shall be very thankful if someone can help me in the same. Here is a brief ...
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1answer
55 views

Why can't I get rid of serial correlation in lag length selection?

I'm doing a statistical study based on the USD price of Bitcoin, including explanatory variables like Google Trends data, Dollar strength, stock exchange etc. Setting up a VAR in levels for lag ...
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Counterintuitive impulse responses in a SVAR model, why?

I did a study with structural vector autoregression (SVAR model) corresponding to the IS-LM model (a macroeconomic model). I have four variables that are I(1). I have fitted the SVAR model to the ...
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how do we interpret cointegration results?

I don't know how to interpret cointegration results? I only done unit root test and trace and maxeigenvalue interpretation but don't know how to find negative and positive relation between the ...
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1answer
34 views

What is the difference between cointegration and the VECM?

What is the difference between cointegration and the vector error correction model (VECM)? I applied cointegration test and found long run association between variables, so should I apply VECM?
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Assistance with methodological procedures for (panel data) [investment/GDP]

I am attempting to see the relationship between FDI and Economic growth. So my two variables are FDI and GDP growth (I am also not opposed to using GDP per capita). My data is panel, as I am using 59 ...
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63 views

How can I represent exogenous I(0) variable in VECM / Cointegrating relationship?

So I am doing an econometric study on Bitcoin's USD price. As an exogenous regressor, I have the total number of bitcoins in circulation (nbtc). The graph looks like this: This variable is: ...
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24 views

VECM for 2 stationary and 1 integrated series

I am carrying the Johansen test on 3 time series variables and eventually estimating a VECM. 2 of my variables are stationary while the other one is nonstationary. I have a few doubts: Do I need to ...
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31 views

Choosing lag length for VAR

I've got 2 questions about this. I'm fitting a VAR in levels in order to select lag length for Johansen cointegration tests. All my data are in natural logarithms. 1) All my variables are I(1) except ...
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Granger causality and Wald test in multivariate non-stationary case

I have a list of market indices (like 20 indices) and want to analyse which indices are the most important for prediction of CDS of a company. Most of the time series are I(1) processes. I was using ...
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Cointegration test with I(1) and I(0) variables

I have four variables, three of them are I(1) and one of them is I(0). I'm using STATA as my software. Can I use Johansen's test to check for cointegration? I understood that all variables should be ...
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Should multicollinearity problem be looked into while doing cointegration?

Multicollinearity and Cointegration is not the same thing however, if the series actually move together in the long-run i.e. are cointegrated wont they also be collinear making e.g. Autoregressive ...
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Query regarding cointegrating vector and cointegration rank

Respected Group Members In VECM, what is the difference between cointegrating vectors and cointegration rank. Do they mean the same thing. If I have three variables (n=3) and getting 2 cointegrating ...
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62 views

Lag order selection in error correction model (ECM)

I am building an Error Correction Model for monthly price data ($X, Y, Z$). I am deliberately using an ECM and not VECM and apply a two step approach (estimating cointegration relationship first, then ...
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26 views

Cointegrated Data Proc Panel SAS

I have data that are co-integrated. I am using a Proc Panel data in SAS in order to run regression analysis. Obviously running the panel regression of one data over a related co-integrated data causes ...
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Multicollinearity, variable selection for cointegration testing in ARDL and VECM/VAR frameworks

I have 15 variables some of which are highly correlated. I want to run a cointegration test in the ARDL and VAR/VECM frameworks. Due to the correlation multicollinearity is a big problem; however, I ...
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69 views

Modelling stationary and integrated time series in one system

I am currently investigating commodities and their impact on the oil price. I have 8 variables of different stationarities $y$ = dependent variable (oil price) is non-stationary I(1); three ...
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1answer
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Can negative relationship between X and Y be spurious

Let's assume I have X and Y and both X and Y have positive relationship. In such case in which both series trend in the same direction, we need to test for cointegration to be sure that relationship ...
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Rules of integrated series and balanced regressions

Background There are various rules of linear combinations of integrated series. Let's just consider the $I(0)$ and $I(1)$ cases. For example, if $x_{t} \sim I(1)$, $y_{t} \sim I(0)$, then $ax_{t} + ...
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Varying orders of integration - VAR/VECM model

I am building a VAR model, and have gotten a thorough set of guidelines through a question I asked a little while ago. However, I am left with some questions based on the following quote from Step 3 ...
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Why is cointegration found without unit root?

I'm working on the multiple price series data to look for the long run relationships. DF-GLS tests for unit root are rejected although the series show some trends and seem stationary after ...
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2answers
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Johansen cointegration test: interpret the result

I am trying to develop a stationary time series with 6 variables in Matlab. Can anyone tell me whether the 6 variables are cointegrated? The results I got are:
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37 views

VAR and cointegration

I'm facing an issue with this VAR models exercise; I want to know whether I solved it correctly or not. Point a) is easy, we choose $p=2$ since the information criteria has its minimum value there. ...
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1answer
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Relationship between cointegrating relationship found via PCA and that found via a Johansen test

Thanks to the explanation given here: PCA on prices or returns I understand how PCA can be used to derive cointegrating relationships. However there is of course another well known method to ...
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69 views

cointegration and correlation

In the following post it was shown by mpiktas that the sample correlation of two I(1) series converge to a random variable. On the other, given two cointegrated I(1) variables the OLS estimator is ...
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63 views

Estimating Cointegration vector

I am learning about the concept of cointegration and I found in various places the following claim about estimating the cointegration vector using OLS which is: Despite the fact that the OLS estimator ...
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75 views

Regression with cointegrated regressors

Suppose that we have the regression model $$Y(t)=\alpha +\beta_1X_1(t)+ \cdots +\beta_nX_n(t)+\epsilon(t)$$ One approach to fitting this model is to use OLS. If the predictor variables ...
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Uncertainties with how to run a VECM for testing the J-curve

I am attempting to test for the existence of a "J-curve" effect (deterioration of the trade balance in the short-term after the depreciation of the currency via more expensive imports, followed by an ...
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26 views

Some, but not all, panels seem to cointegrate

I am trying to estimate the long-run relationship between equity prices and bond default risk measures using a 250*250 panel of firms. There is strong theoretical evidence that there is a relationship ...
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37 views

How should I run a regression on cointegrated variables?

The variables are non-stationary for levels but become stationary for first differences, in other words they are $I(1)$. Also they have been already further checked for cointegration using Johansen ...
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Cointegration in the short run

I have a very basic question on cointegration; does the term "cointegration" refer to the long run or can we have short-run cointegration, too?
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Log-transforming time series data before cointegration testing

I am testing the cointegration between these variables: Gold Price (Ringgit), Exchange Rate - MYR to USD (Ringgit), Real Effective FX Rate Based on CPI, T-Bill 10 Years Rate, Consumer Price Index. ...
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Johansen test for cointegration

I am testing for cointegration using the Johansen test. I have seen questions like how to interpret the test results, but when I am interpreting mine I have some doubts. In my results ...