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A time series paradox: Unit root tests perform poorly when data are cointegrated

W. Reed () and Aaron Smith

Economics Letters, 2017, vol. 151, issue C, 71-74

Abstract: Cointegration among times series paradoxically makes it more likely that a unit test will reject the unit root null hypothesis on the individual series. This occurs because at least one series in the system has a negative moving average component.

Keywords: Unit root testing; Cointegration; Augmented Dickey–Fuller test; Akaike Information Criterion (AIC); Bayesian Information Criterion (BIC); Modified Akaike Information Criterion (MAIC) (search for similar items in EconPapers)
JEL-codes: C32 C22 C18 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecolet:v:151:y:2017:i:c:p:71-74