Questions tagged [cointegration]
Two or more non-stationary, integrated variables are cointegrated if there exists a linear combination of those variables which is integrated of a lower order, e.g. stationary.
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Prediction based on new data in the tsDyn package [closed]
I decided to use the tsDyn package to build the model and precision the values. The argument for this package (I previously worked with urca, vars) was the ability to make predictions based on new ...
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Interpreting an estimated bivariate VECM
I have used the tsDyn package in R to estimate a VEC model for the data in the graph, and I am unsure about my interpretation of the output.
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Granger causality does not imply a pair of integrated time series are cointegrated: an example
If a pair of integrated time series $\{X_t\}$ and $\{Y_t\}$ are cointegrated, at least one of them must Granger-cause the other. Is the converse also true? I guess not, but I am struggling to come up ...
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Mincer-Zarnowitz test with cointegrated time series
The Mincer-Zarnowitz test of forecast optimality regresses forecast errors $e_{t+h|t}$ on the forecasts $\hat y_{t+h|t}$,
$$
e_{t+h|t} = \gamma_0 + \gamma_1\hat y_{t+h|t} + u_t \tag{1}
$$
or in ...
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Panel data cointegration test: Package pco in R, how to interpret output from pedroni99 function?
I have a panel dataset and I want to test cointegration between 2 variables. I cleaned the missing values and set my data frame as required but I don't know and can't find how to interpret the outcome ...
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Johansen cointegration, VAR, VECM
I do have a question regarding Johansen's cointegration, VAR, and VECM model estimation. I would like to analyze the relationship between two variables using these methods. My dataset consists of 4 ...
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Cointegration in quantile regression
I used quantile regression for my research. My variables were significant but my pseudo r was low. So I tested for cointegration.
All my variables are I(1) and when I run the models with raw (...
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How to find cointegrating vectors
How to find cointegrating vectors and how many vectors could there be if $e_t\ $, $p_t\ $ and $p_t^\ast\ $ are cointegrated?
$
e_t\ =\ p_t\ -\ p_t^\ast\ +\ v_t
$
$
p_t\ =\ p_{t-1}+\ u_{2t}
$
$
p_t^\...
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Prediction intervals - "VAR in levels" vs "VAR in differences"
The prediction intervals are much wider on my "VAR in differences" model than in my "VAR in levels" model. Any ideas of why this might be the case? I know there is a strong ...
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Trade-offs when building VAR models
I am trying to build my first VAR model, consisting of three time series, for forecasting and have gotten quite far. I have made all the tests and comparing models indcluding different lags, different ...
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Unit root test and cointegration
maybe someone can help me with my data.
I analyse how macroeconomic indicators affect stock index. For this analysis I prefer VAR model.In my case data of all variables are non-stationary - I have ...
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Johansen test: why testing for the algebraic multiplicity of 0 and not for the nullity?
From what I already know about the Johansen test, it tests the rank of the VAR matrix (in error correction form) through steps testing whether every eigenvalue is signifincantly different from 0 (...
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Johansen test accepts first null hypothesis but would reject last one
Suppose that we perfrom a Johansen test over three I(1) variables that give us these results through the maximum eigenvalues statistic:
as you can see, we accept the null hypothesis in the first step ...
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Cointegration $p$-value and VECM loading forces show low correlation
After having read about VEC model (VECM), I thought that cointegration and VECM loading forces were strongly, not to say numerically correlated. I thought that the more we have cointegration, the less ...
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R ecdet in ca.jo() [closed]
I am experimenting with the ca.jo function of the urca package and I am getting confused about the ...
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How to find p-value from Johansen test in R (urca::ca.jo)?
Using the urca package in R, and the ca.jo() function, I can run a Johansen test and get the test statistic and critical values ...
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Uniqueness of cointegration coefficient
Let $A_t$ and $B_t$ be $I(1)$ processes and assume that they are co-integrated i.e. there exists $\beta$ such that $A_t - \beta B_t$ is $I(0)$. Woolridge's Introductory Econometrics text (5th edition, ...
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Correct cointegration p-value by sample size?
I have several time séries couples from which I compute cointegration p-value, then sort these couple by that p-value, starting from the lowest (for further VECM analysis on the top 100).
All couples ...
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Cross correlation between cointegrated time series
I want to test cross correlation between two non stationary time series which are algo cointegrated. I was wondering if to do this I can use the ccf command in R or if I should use another one.
As the ...
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VECM: alpha is a 0-vector? cointegration rank = $k$ even though $X_t$ is I(1)?
I'm trying to wrap my head around the VECM model by doing some simple examples. In this exercise I'm taking the log prices of 2 assets, A and B. These prices are clearly not stationary, for example <...
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Forecasting VECM model ( Python and R )
I'm working on an academic project. The aim is to forecast some cointegrated time series.
I retrieved the data from 2008 to 2018 of the observations of 30 time series.
I performed a unit-root test to ...
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ACF/PACF of my residuals from the cointegration model shows a perfect 1-lag autocorrelation?
I'm performing a cointegration test + OLS regression on 2 assets' prices. If I check the correlogram of the model residuals (training set, but also happens with the test set residuals) it looks like ...
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Need help in panel data tests and steps
Greetings!
I am analyzing the impact of climate change of wheat crop across 4 districts for the last 30 years.
It is imperative to check the stationarity of the panels.
I performed LLC and IPS tests. ...
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How to calculate the mean and standard deviation of a time series spread?
I am just starting anew in econometrics, and am presently trying out statistical arbitrage, specifically cointegration. I have stochastic time series data for variables A, B. Engle-Granger testing is ...
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In order to estimate an ARDL model, should the variables be integrated of the same order?
I am confused by reading different materials on ARDL. My question is whether the dependent and independent variables should be integrated of the same order, or they could be either I(0) or I(1), but ...
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Johansen Cointegration Test returns non-stationary error even though trace statistics suggest their existence
Before I start, I asked this question on Quant Finance before. But other Questions going into the same direction have been redirected to this stack exchange. Therefore I post this here as well.
I'm ...
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Johansen Cointegration test in Python (statsmodels)
I have three time series df['a'], df['b'] and df['c'] which I want to test for cointegration ...
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How to deal with non normality of residuals in VECM?
Does anyone know how to handle non normality of residuals in VECM? I have tried transforming the data into log, exp, and Box-cox but nothing has changed. Any suggestion will do. Thank you.
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How to deal with VECM with a different structural break for each time series?
I am modelling a VECM with structural breaks. I am following Joyeux (2007) way of doing it with dummy variables, including the different trace and eigenvalue stats for cointegration with structural ...
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Investigating the presence of unit root in the following $X_t$
I am given a model and need to calculate the unit-root of $X_t$ but it seems that there is no unit-root.
The model is given: $X_t = (x_{1t},x_{2t})'$
$$\Delta X_t = \alpha \beta ' X_{t-1} + \epsilon_t ...
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What is the role of Panel Cointegration Analysis in Estimating Long Run Effects for ARDL models?
I am estimating some panel ARDL models, and wanted to ask where the value add comes from with cointegration analysis. From what I've read, one can estimate long-run effects using an ARDL in levels as ...
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Python statmodel coint doesn't give the same p-value as adfuller on OLS residual
According to Eagle and Granger (1987), if I have 2 time series y1 and y2, we can test their cointegration with the p-value of an ADF stationarity test performed on the OLS residual.
Though, when ...
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Forecasting accuracy of VECM using train and test
I am forecasting using VECM and I plan to do it on train and test split data. My data is 132 monthly observations. My VECM is lag 3 with unrestricted constant. All diagnostic test are passed.
I plan ...
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Interpretation of VECM results when the variables are swapped as response variable
I have two variables, which is Tomato farmgate price and retail price. When I use VECM, both variables are endogenous. However, there can still be a response variable (ex. when you put the variable ...
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In Panel Data models, could we apply, the existing Unit Root tests (e.g. IPS) to the residuals in order to test for cointegration?
The Engle Granger approach suggests that we check the regression residuals stationarity with ADF test and if the residuals are stationary, even if not all other model variables are, we can say there ...
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Johansens Cointegration test - VARselect output showing all Lag 1's
I am running a cointegration test on 4 input variables over 1 year and when I run the VARselect it outputs:
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Regularize variables for Johansen coinegration
I am looking into applying the Johansen cointegration procedure to variables of very different scales, going from units to tens of thousands. I use log(prices) but the scale difference is still very ...
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Interpretation of the trend variable in the cointegrating equation of VECM (VECM Case 4: Unrestricted trend)
I am doing VECM of prices of meat. This one result confuses me. This one shows that P_F and P_R has a positive relationship. This can be interpreted at 1% of P_R is 0.18% of P_F. However it also shows ...
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ARDL Model in First Differences For Non-Cointegrated Time Series?
I would like to regress $Y_t$ on $X_t$. I have concluded that the series are each $I(1)$ and not cointegrated. I am curious as to if I can still use an ARDL model to capture any possible long-term ...
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Johansen test - r studio , "ect1" "ect2" etc
Can someone explain to me the result of this test? I am not sure what the ect1, ect2, etc. mean.
Output
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The cointegrating equation in VECM changed sign when I added a trend in the deterministic regressor
I am studying the cointegration between retail prices of pork. In an economical theory this should have a positive relationship. However, when I tested for cointegration using Johansen in Eviews, it ...
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Johansen test and Philip-Perron test for cointegration
I'm dealing with a cointegration problem.
Can anyone explain me which is the difference between the Johansen test and the Philip-Perron test for cointegration?
And what does it mean to use the "...
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Johansen cointegration test for ECM model
I'm dealing with the Johansen cointegration test before running an ECM model.
I cannot figure out which type of test execute: with/without constant, with/without trend, ...
How can I choose the ...
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How to specify a VAR model in R with non-stationary, stationary, and trend-stationary variables?
I have a multivariate time series and I want to estimate a VAR model. I tested for unit roots with the ADF and KPSS test and concluded that some variables are non-stationary, while others are ...
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Lagged regression with more than one predictor time-series
I have n + 1 different discrete time series. One of them is {Yt}, which I call ‘response time series’, and the other n are {Xt,i} (i = 1,…,n) which I call predictor series. I define n time lag ...
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Engle-Granger approach to cointegration, and use of other integration tests
The Engle and Granger define two series as cointegrated, if they are integrated, but a linear combination of the two series exist, which is stationary.
To estimate the cointegrating vector (i.e. the ...
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Applying the Engle-Granger and the Johansen test to univariate multiple regression
I have want to test the cointegration of interest rates in three time series: a group of small open economies, US, and Erozone. I use daily data, and assume that the small open economy has no impact ...
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Why is stationarity in a time series useful?
I'm trying to figure out how stationarity can be useful when analysing time series data and I can't find any satisfying explanations online.
I understand that since the mean and variance are constant ...
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Cointegration tests and deciding which is Y and X variables
I understand the Engle-Granger test, we regress Y on X, get residuals, then test those residuals for cointegration.
What does it mean to do the other way round, I.e to get residuals from
X = c + bY
...
