Comment on testing for spurious and cointegrated regressions: a wavelet approach
Authors registered in the RePEc Author Service: Javier Fernandez-Macho
Journal of Applied Statistics, 2015, vol. 42, issue 8, 1759-1769
In a recent paper, Leong and Huang  proposed a wavelet-correlation-based approach to test for cointegration between two time series. However, correlation and cointegration are two different concepts even when wavelet analysis is used. It is known that statistics based on non-stationary integrated variables have non-standard asymptotic distributions. However, wavelet analysis offsets the integrating order of non-stationary series so that traditional asymptotics on stationary variables suffices to ascertain the statistical properties of wavelet-based statistics. Based on this, this note shows that wavelet correlations cannot be used as a test of cointegration.
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