# Mixed signals among tests for cointegration

## Author Info

Listed author(s):
• Allan W. Gregory

• Alfred A. Haug

• Nicoletta Lomuto

(DATACORP, Providence, Rhode Island, USA)

Registered author(s):

## Abstract

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
File Function: Link to full text; subscription required

File URL: http://qed.econ.queensu.ca:80/jae/2004-v19.1/
File Function: Supporting data files and programs

## Bibliographic Info

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 DOI: 10.1002/jae.733 Contact details of provider: Web page: http://www.interscience.wiley.com/jpages/0883-7252/ Order Information: Web: http://www3.interscience.wiley.com/jcatalog/subscribe.jsp?issn=0883-7252 Email:

## References

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1. 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 563-577, Sept.-Oct.
2. repec:bla:restud:v:57:y:1990:i:1:p:99-125 is not listed on IDEAS
3. 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.
4. Whitney K. Newey & Kenneth D. West, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Oxford University Press, vol. 61(4), pages 631-653.
5. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-348, August.
6. Haug, Alfred A., 1996. "Tests for cointegration a Monte Carlo comparison," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 89-115.
7. Hansen, Bruce E., 1992. "Efficient estimation and testing of cointegrating vectors in the presence of deterministic trends," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 87-121.
8. Gregory, Allan W, 1994. "Testing for Cointegration in Linear Quadratic Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 347-360, July.
9. 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.
10. Chao, John C. & Phillips, Peter C. B., 1999. "Model selection in partially nonstationary vector autoregressive processes with reduced rank structure," Journal of Econometrics, Elsevier, vol. 91(2), pages 227-271, August.
11. repec:cup:etheor:v:11:y:1995:i:5:p:1015-32 is not listed on IDEAS
12. Eric Zivot, 1996. "The Power of Single Equation Tests for Cointegration when the Cointegrating Vector is Prespecified," Econometrics 9612001, EconWPA.
13. 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.
14. 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 601-618, Nov.-Dec..
15. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-193, January.
16. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
17. 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 369-381, August.
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