I want to use VECM model for return as dependent variable and I have 5 variables as independent; my data is monthly ...and my questions are:
- How could I know if I should use linear or non linear for my model when I want to use VECM?
- How many lags should I use for VECM and Johansen (when there are for example X1 stationary at level, X2 stationary at first difference, X3 stationary at second difference)?
- What is the difference between the VECM model and the system for the VECM model? And which one should I use to check for $R^2$ and LM and heteroscedasticity tests ...ets?
- If my results show 4 cointegration which one should I use?
I will appreciate any help ...or if there are books for my subject could any one guide me please?