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The Power of Cointegration Tests Versus Data Frequency and Time Spans

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  • Su Zhou

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    (Division of Economics and Finance, College of Business, University of Texas at San Antonio)

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    Abstract

    Using Monte Carlo methods, this study illustrates the potential benefits of using high frequency data series to conduct cointegration analysis. The study also provides an account of why the results are different from those reported by Hakkio and Rush (1991). The simulation results show that when the studies are restricted by relatively short time spans of 30 to 50 years, increasing data frequency may yield considerable power gain and less size distortion, especially when the cointegrating residual is not nearly nonstationary, and/or when the models with non-zero lag orders are required for testing cointegration. The study may help clarify some misconceptions and misinterpretations surrounding the role of data frequency and sample size in cointegration analysis.

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    Bibliographic Info

    Article provided by Southern Economic Association in its journal Southern Economic Journal.

    Volume (Year): 67 (2001)
    Issue (Month): 4 (April)
    Pages: 906-921

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    Handle: RePEc:sej:ancoec:v:67:4:y:2001:p:906-921

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    Cited by:
    1. Thomas Fullerton & Miwa Hattori & Cuauhtémoc Calderón, 2001. "Error correction exchange rate modeling: Evidence for Mexico," Journal of Economics and Finance, Springer, vol. 25(3), pages 358-368, September.
    2. Gregoriou, Andros & Kontonikas, Alexandros, 2008. "The long run relationship between stock prices and goods prices: new evidence from panel cointegration," SIRE Discussion Papers 2008-32, Scottish Institute for Research in Economics (SIRE).
    3. Zhou, Su, 2003. "Interest rate linkages within the European Monetary System: new evidence incorporating long-run trends," Journal of International Money and Finance, Elsevier, vol. 22(4), pages 571-590, August.
    4. Tang, Chor Foon, 2010. "Savings-led growth theories: A time series analysis for Malaysia using the bootstrapping and time-varying causality techniques," MPRA Paper 27299, University Library of Munich, Germany.
    5. Tang, Chor Foon, 2009. "Does causality technique matter to savings-growth nexus in Malaysia?," MPRA Paper 38535, University Library of Munich, Germany.
    6. Tang, Chor Foon, 2008. "A re-examination of the relationship between electricity consumption and economic growth in Malaysia," Energy Policy, Elsevier, vol. 36(8), pages 3067-3075, August.
    7. Tang, Chor Foon, 2010. "A note on the nonlinear wages-productivity nexus for Malaysia," MPRA Paper 24355, University Library of Munich, Germany.
    8. Chor Foon Tang & Soo Y. Chua, 2012. "The savings-growth nexus for the Malaysian economy: a view through rolling sub-samples," Applied Economics, Taylor & Francis Journals, vol. 44(32), pages 4173-4185, November.

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