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The Power of Cointegration Tests Versus Data Frequency and Time Spans


  • Su Zhou

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


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.

Suggested Citation

  • Su Zhou, 2001. "The Power of Cointegration Tests Versus Data Frequency and Time Spans," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 906-921, April.
  • Handle: RePEc:sej:ancoec:v:67:4:y:2001:p:906-921

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    References listed on IDEAS

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    Cited by:

    1. Gregoriou, Andros & Kontonikas, Alexandros, 2010. "The long-run relationship between stock prices and goods prices: New evidence from panel cointegration," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(2), pages 166-176, April.
    2. Tang, Tuck Cheong, 2003. "An empirical analysis of China's aggregate import demand function," China Economic Review, Elsevier, vol. 14(2), pages 142-163.
    3. Thomas Fullerton & Miwa Hattori & Cuauhtémoc Calderón, 2001. "Error correction exchange rate modeling: Evidence for Mexico," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 25(3), pages 358-368, September.
    4. Mutuc, Maria & Pan, Suwen & Hudson, Darren, 2011. "Response of Cotton to Oil Price Shocks," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 12(2), June.
    5. Panopoulou, Ekaterini & Pantelidis, Theologos, 2016. "The Fisher effect in the presence of time-varying coefficients," Computational Statistics & Data Analysis, Elsevier, vol. 100(C), pages 495-511.
    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. 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.
    8. Partha Ray & Vinodh Madhavan, 2014. "Price and Volatility Linkages between Indian Stocks and their European GDRs," Proceedings of International Academic Conferences 0300812, International Institute of Social and Economic Sciences.
    9. repec:col:000411:015716 is not listed on IDEAS
    10. Shaar, Karam & Khaled, Mohammed, 2017. "Why you should use high frequency data to test the impact of exchange rate on trade," Working Paper Series 6125, Victoria University of Wellington, School of Economics and Finance.
    11. Ayla Oğuş Binatli & Niloufer Sohrabji, 2012. "Intertemporal Solvency of Turkey’s Current Account," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(1), pages 89-104, March.
    12. repec:ksp:journ2:v:4:y:2017:i:2:p:130-148 is not listed on IDEAS
    13. 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.
    14. Tang, Chor Foon, 2010. "A note on the nonlinear wages-productivity nexus for Malaysia," MPRA Paper 24355, University Library of Munich, Germany.
    15. Yunus, Nafeesa, 2015. "Trends and convergence in global housing markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 36(C), pages 100-112.
    16. Shahbaz, Muhammad & Arouri, Mohamed & Teulon, Frédéric, 2014. "Short- and long-run relationships between natural gas consumption and economic growth: Evidence from Pakistan," Economic Modelling, Elsevier, vol. 41(C), pages 219-226.
    17. 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.
    18. Md. Samsul Alam & Muhammad Shahbaz & Sudharshan Reddy Paramati, 2016. "The Role of Financial Development and Economic Misery on Life Expectancy: Evidence from Post Financial Reforms in India," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(2), pages 481-497, September.
    19. Tang, Chor Foon, 2009. "Does causality technique matter to savings-growth nexus in Malaysia?," MPRA Paper 38535, University Library of Munich, Germany.
    20. Damen, Sven & Vastmans, Frank & Buyst, Erik, 2016. "The effect of mortgage interest deduction and mortgage characteristics on house prices," Journal of Housing Economics, Elsevier, vol. 34(C), pages 15-29.

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