Mixed signals among tests for cointegration

Allan Gregory, Alfred Haug and Nicoletta Lomuto
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Nicoletta Lomuto: DATACORP, Providence, Rhode Island, USA, Postal: DATACORP, Providence, Rhode Island, USA

Journal of Applied Econometrics, 2004, vol. 19, issue 1, 89-98

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.

Date: 2004
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DOI: 10.1002/jae.733

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