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Mixed signals among tests for cointegration

  • Allan W. Gregory

    (Queen's University, Kingston, Canada)

  • Alfred A. Haug

    (York University, Toronto, Canada)

  • Nicoletta Lomuto

    (DATACORP, Providence, Rhode Island, USA)

This paper illustrates that, under the null hypothesis of no cointegration, the correlation of p-values from a single-equation residual-based test (i.e., ADF or $\widehat{Z}_{\alpha}$ ) with a system-based test (trace or maximum eigenvalue) is very low even as the sample size gets large. With data-generating processes under the null or 'near' it, the two types of tests can yield virtually any combination of p-values regardless of sample size. As a practical matter, we also conduct tests for cointegration on 132 data sets from 34 studies appearing in this Journal and find substantial differences in p-values for the same data set. Copyright © 2004 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.733
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File URL: http://qed.econ.queensu.ca:80/jae/2004-v19.1/
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 19 (2004)
Issue (Month): 1 ()
Pages: 89-98

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Handle: RePEc:jae:japmet:v:19:y:2004:i:1:p:89-98
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  1. Jeroen J.M. Kremers & Neil R. Ericsson & Juan J. Dolado, 1992. "The power of cointegration tests," International Finance Discussion Papers 431, Board of Governors of the Federal Reserve System (U.S.).
  2. Newey, W.K. & West, K.D., 1992. "Automatic Lag Selection in Covariance Matrix Estimation," Working papers 9220, Wisconsin Madison - Social Systems.
  3. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-77, Sept.-Oct.
  4. Saikkonen, Pentti & L tkepohl, Helmut, 2000. "Testing For The Cointegrating Rank Of A Var Process With An Intercept," Econometric Theory, Cambridge University Press, vol. 16(03), pages 373-406, June.
  5. John C. Chao & Peter C.B. Phillips, 1997. "Model Selection in Partially Nonstationary Vector Autoregressive Processes with Reduced Rank Structure," Cowles Foundation Discussion Papers 1155, Cowles Foundation for Research in Economics, Yale University.
  6. Toda, Hiro Y., 1995. "Finite Sample Performance of Likelihood Ratio Tests for Cointegrating Ranks in Vector Autoregressions," Econometric Theory, Cambridge University Press, vol. 11(05), pages 1015-1032, October.
  7. Haug, A.A., 1992. "Tests for Cointegration: A Monte Carlo Comparison," Papers 93-2, York (Canada) - Department of Economics.
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  9. Boswijk, Peter & Franses, Philip Hans, 1992. "Dynamic Specification and Cointegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 369-81, August.
  10. Peter C.B. Phillips & Sam Ouliaris, 1987. "Asymptotic Properties of Residual Based Tests for Cointegration," Cowles Foundation Discussion Papers 847R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1988.
  11. Zivot, Eric, 2000. "The Power Of Single Equation Tests For Cointegration When The Cointegrating Vector Is Prespecified," Econometric Theory, Cambridge University Press, vol. 16(03), pages 407-439, June.
  12. Eric Zivot, 1996. "The Power of Single Equation Tests for Cointegration when the Cointegrating Vector is Prespecified," Econometrics 9612001, EconWPA.
  13. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
  14. repec:cup:etheor:v:11:y:1995:i:5:p:1015-32 is not listed on IDEAS
  15. Allan W. Gregory, 1991. "Testing for Cointegration in Linear Quadratic Models," Working Papers 811, Queen's University, Department of Economics.
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