Testing for Cointegration in the Presence of Moving Average Errors
Abstract�This study explores performance of the Johansen cointegration statistics on data containingnegative moving average (NMA) errors. Monte Carlo experiments demonstrate that the asymptoticdistributions of the statistics are sensitive to NMA parameters, and that using the standard 5%asymptotic critical values results in severe underestimation of the actual test sizes. We demonstratethat problems associated with NMA errors do not decrease as sample size increases; instead,they become more severe. Further we examine evidence that many U.S. commodity prices arecharacterized by NMA errors. Pretesting data is recommended before using standard asymptoticcritical values for Johansenâ€™s cointegration tests
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 36076.
Date of creation: 31 Dec 2012
Date of revision:
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Web page: http://www.econ.iastate.edu
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cointegration; Johansen cointegration test; moving average;
Other versions of this item:
- Mallory Mindy & Lence Sergio H., 2012. "Testing for Cointegration in the Presence of Moving Average Errors," Journal of Time Series Econometrics, De Gruyter, vol. 4(2), pages 1-68, November.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-06 (All new papers)
- NEP-ECM-2013-04-06 (Econometrics)
- NEP-ETS-2013-04-06 (Econometric Time Series)
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