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

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What does “degrees of freedom” mean in the context of cointegration?

I recently read a paper where the author says they used cointegration "with two degrees of freedom". What does degrees of freedom mean in this context?
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7 views

Cointegration between two stationary processes

I have two stationary time series. I would like to check for cointegration between them. Does this make sense, and can I just use Engle-Granger Test (two step) for Cointegration for this?
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11 views

Stationary processes I(0) cointegration, does it make sense?

I'm looking at two time series and I would like to determine how they move together. They both are however stationary. Would it make sense to test for cointegration? Linear relationship between both ...
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12 views

Getting cointegration vectors using Johansen method

I'm trying to understand better Johansen method so I developed an example 3.1 given by the book Likelihood-Based-Inference-Cointegrated-Autoregressive-Econometrics where we have three processes: ...
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25 views

Inference from a sometimes-random time-series

Let's say we have two cointegrated time-series, $Y_{1}$ and $Y_{2}$, and I want to assess the causal impact of $Y_{1}$ on $Y_{2}$. There is good reason to think that both variables are influenced by a ...
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21 views

Interpreting vecm result with 4 cointegrating equations

I have performed Johansen cointegration test and the result shows that I have more than one cointegration for all my models. Below is the cointegration test result for one of my models (I have 6). ...
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17 views

Interpreting the Johansen cointegration test output

I am running the Johansen cointegration test using 2 non-stationary time-series, as suggested by the literature. The output I got is the following: ...
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2answers
55 views

Why does ca.jo has a minimum lag order of 2?

I am trying to use urca library to do cointegration test, and its function ca.jo, which conducts the Johansen procedure on a given data set. I think a lag order of 1 is possible for a cointegrated ...
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14 views

Long-run cointegration and I(2) variables

I'd like to run a test for long-run cointegration of two time series: CO2 emissions/capita and energy use/capita in China. My data includes 23 observations for years 1990-2012. Now as far as I know I ...
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1answer
55 views

Why is there a need to do OLS regression of VECM?

I am trying to use the R package urca. It has functions cajorls and carools, which do OLS regression of restricted and unrestricted VECM respectively. Both functions take in the VECM estimated using ...
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2answers
80 views

cointegration - same thing as stationary residuals?

So I'm aware that cointegration means there is some linear combination of the set of variables that is stationary. So, if you do a regression and find stationary residuals, can you just immediately ...
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30 views

Time Series Econometrics: Cointegration methods for series with mixed degree of integration

I am performing a time series analysis on dataset ranging from 1974-2008. I have performed Augmented Dickey Fuller tests and Phillips Perron tests to check the stationarity/ order of integration of my ...
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1answer
25 views

Explanation of order of integration in the context of cointegration

Please explain the meaning of 'order of integration' when talking about cointegration. An explanation with some examples would be great.
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1answer
68 views

structural breaks in time series using matlab

in a plot of my time series there is clearly visible that there is structural break, but I have to find the exact date. I want test this with the chow test. Although I understand how to perform this ...
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0answers
30 views

clarification Johansen cointegration matlab

To my understanding the Johansen cointegration test, will test first if the time series have zero cointegrations, if rejected, the Johansen test will test for one cointegration, if rejected, it will ...
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35 views

Transforming time series of different time horizon to stationary

I have a list of monthly time series data with different time periods and different order of integration. I want to transform them all to stationary and a same time period. I noticed that the order ...
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22 views

Hp testing on cointegrating vectors of an identified VECM

I have estimated a VECM model, then I have used linear restrictions to identify and over-identify my model. Now I have the following output. How can I test the significance of the coefficients in the ...
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1answer
28 views

Test statistic distribution in a cointegrating regression

Let's assume I have a simple cointegrating regression of the type $$y_t=\beta_0+\beta_1x_t+\varepsilon_t$$ $y,x$ are $I(1)$. If testing the OLS residuals I find that $y$ and $x$ are cointegrated, ...
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1answer
23 views

Is there a way to “regularize” the Johansen cointegration test?

I'm using a Johansen cointegration test to check for cointegration among a large number of time series. I've found that while the eigenvectors look great in-sample, the cointegrating relationships ...
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24 views

Johansen's cointegration test and multicollinearity

Which variables to use when running Johansen's cointegration test? levels or the differenced? How can I better detect and avoid multicollinearity before running Johansen's cointegration test?
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56 views

Pairs Trading: What statistics to use for analysis of Cointegration using ADF Test?

I have just begun to study Pairs Trading strategy as a part of my assignment for an internship. My purpose is to analyse any two stocks/commodities for possible co-integration. I made a VBA code where ...
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1answer
38 views

what if I know my time series are cointegrated over a long period but not over a short period?

I am regressing time series on time series. I have tested for cointegration on the entire time sample (3 years) and the series are cointegrated. I need to make a rolling window of regressions (to ...
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14 views

cointegration with time trend and binary variables

I have an equation composed of one explained variable and three explanatory variables, which are all non-stationary. Is it possible to add for the equation another two variables: a time trend and a ...
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1answer
45 views

How to test if time series are not cointegrated?

Is there a test whose null hypothesis is that time series are cointegrated? There are lots of tests whose null is no cointegration. How can I calculate a p-value for the null that two series are ...
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16 views

High correlation will help detect spurious regression over cointegration?

I'm analyzing two financial time series with Johansen method. A high Correlation coefficient using the Pearson method will help me to detect spurious cointegration models to avoid? If this is not ...
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39 views

how to do conditional forecasting with cointegration model?

I'm confused about multistep forecasting from VECM model for 2 cointegrated series. The model is pretty simple, in error-correction form: $$ \Delta x_{t+1} = \alpha_1 (y_t - \beta x_t -\beta_0) ...
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1answer
53 views

What's the practical difference between the Johansen vs Engle-Granger tests for cointegration?

For the two-variable case, what are the practical differences between using the Engle-Granger procedure versus the Johansen test for cointegration? Is one universally more powerful than the other? ...
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1answer
100 views

Where can I find ADF test library or source code from c#

I would like to test for stationarity in cointegration. I intend to use an augmented dickey fuller test. However, I need one for c# - either a library or the source code. Or is your have source in a ...
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1answer
69 views

How can i find the significance of the cointegrating coefficients in output cajorls-function in R?

I investigate the long-term relationship of some variables but in the output provided by cajorls-function, I can't see for each coefficient if it is significant? This is provided by the ...
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1answer
87 views

Panel Cointegration, Moderating Effects and Multicollinearity

I am running a panel fixed effects regression on 21 countries and 16 years. Its a secondary data taken from OECD website mostly. My model looks like this: $$ \log{(GDP/Labor)}_{i} = \beta_0 +\beta_1 ...
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29 views

ECM and Cointegration

Can i apply a standar OLS ECM after proving cointegration using johansen approch? The results for VECM are uncertain and one of the equation gives a negative R squared. If i want to test only one ...
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61 views

Johanson test conditions and Breusch-Godfrey LM test

I am a student from Belgium and I am making a thesis about the relationship between credit aggregates and property prices. I examine the Granger causality between the two variables and I also do some ...
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43 views

VAR / VEC in levels or difference depending on Cointegration

Thanks in advance. I have four I(1) variables I'm trying to model by VAR/VEC. I know that it is only okay to model non-stationary variables in levels only if they are cointegrated. What I would ...
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45 views

Cointegration difficulties using Stata

I am working on a time series analysis with 52 quarterly data concerning a variety of possible determinants of CO$_2$ emissions by transport (CO$_2$ taxes, GDP, load factor, transport volume). This ...
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41 views

VECM , VAR or Granger causality

In my study, the variables are cointegrated. Now I want to test causality so should I perform VAR, VECM or the Granger causality test?
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18 views

Can co-integration be conducted if one of the variables is not of the same order?

All my independent variables are stationary at their levels except one variable which became stationary after first difference i.e. my dependent variable. Can I still conduct co-integration test ?
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1answer
74 views

Cointegrated series

My problem is this: I have 2 series $y$ and $x$ that I want to verify are cointegrated. So first I verified them with ADF unit root test and revealed that one variable is integrated at first ...
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29 views

Modelling a time series with the “optimal” combination of N proxy series

I have a time series T. I also a universe U of time series such that A, B, C ... Q are time series that belong to the universe U. My problem decomposes into the following sub tasks: Find a subset ...
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117 views

Raw Prices vs. Daily Return vs. Price Ratio - ADF unit-root test

As the title suggests, I'd like to ask what the difference between using Raw Prices vs. Daily Return vs. Price Ratio in the Augmented Dickey-Fuller unit-root test. The context is that I am trying to ...
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1answer
108 views

Regression discontinuity design versus panel cointegration

I have a panel data (21 years) and I am trying to figure out whether I should use regression discontinuity design (RDD) or panel cointegration. I do have a randomness in the assignment variable and so ...
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163 views

Dynamic Panel models, GMM, STATA

just joined this forum I really appreciate the coperative spirit between members. I have a silly questions but its quite important for me :s Im wirting a paper about the contribution of foreign banks ...
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132 views

About the stationarity of a sine wave

I generated two sine wave time series and want to check the stationarity of them. (1) The first time series is short. kpss.test() thinks it is stationary. ...
6
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5answers
4k views

Why use vector error correction model?

I am confused about the Vector Error Correction Model (VECM). Technical background: VECM offers a possibility to apply Vector Autoregressive Model (VAR) to integrated multivariate time series. In the ...
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3answers
198 views

Does zero correlation between 2 differenced series implies no cointegration between original series?

The question is related to this one. In this question @mpiktas gives an answer on why checking correlation is not enough but the answer doesn't seem completely correct to me for the following reason: ...
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176 views

Cointegration but no Granger-Causality found

I have found Cointegration based on Engle/ Granger and Johansen. However, Granger-causality is rejected for both variables. How is that possible? According to theory, if x and y are I(1) and ...
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2answers
204 views

Non-stationary series keep close to each other but correlation between growth rates is ~0 - how is this possible?

I have 2 (monthly) time-series that look like this: Economical intuition suggests that they are positively related and I can see this on the plot but if I compute correlation between their ...
0
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1answer
137 views

Handling stationarity issues in proc ucm/state space time series models

Hope I'm able to find someone who can answer this question. The previous one didn't get answered! Proc ucm is the SAS implementation (using state space concepts) to isolate the unobserved trend, ...
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47 views

ADF test in R yielding perfect cointegration. How is this possible?

I am using the famous conintegrated pairs tutorial to just different stocks for cointegration. The adf.test yeilds perfect cointegration, which I feel must be incorrect. Here is why: When I run ...
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1answer
262 views

Johansen test loading matrix

I'm using the URCA package in R to test for cointegration by Johansen's method. Can anyone tell me what the weights (loading ...
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1answer
64 views

Linear combination of processes yielding higher order of integrarion

Is it possible to have an integrated random walk process by linearly combining finite number of random walks? Is it possible to have a random walk process by linearly combining I(0) processes? ...