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Mixed signals among tests for cointegration

Author

Listed:
  • Allan W. Gregory

    (Queen's University, Kingston, Canada)

  • Alfred A. Haug

    (York University, Toronto, Canada)

  • Nicoletta Lomuto

    (DATACORP, Providence, Rhode Island, USA)

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.

Suggested Citation

  • Allan W. Gregory & Alfred A. Haug & Nicoletta Lomuto, 2004. "Mixed signals among tests for cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(1), pages 89-98.
    • Handle: RePEc:jae:japmet:v:19:y:2004:i:1:p:89-98
    DOI: 10.1002/jae.733
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    References listed on IDEAS

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