Testing for Cointegration in the Presence of Moving Average Errors

Mindy Mallory () and Sergio Lence

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This study explores performance of the Johansen cointegration statistics on data containingnegative moving average (NMA) errors. Monte Carlo experiments demonstrate that the asymptoticdistributions of the statistics are sensitive to NMA parameters, and that using the standard 5%asymptotic critical values results in severe underestimation of the actual test sizes. We demonstratethat problems associated with NMA errors do not decrease as sample size increases; instead,they become more severe. Further we examine evidence that many U.S. commodity prices arecharacterized by NMA errors. Pretesting data is recommended before using standard asymptoticcritical values for Johansen's cointegration tests

Keywords: cointegration; Johansen cointegration test; moving average (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Date: 2012-12-31
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in Journal of Time Series Econometrics 2012, vol. 4 no. 2

Downloads: (external link)
http://www2.econ.iastate.edu/papers/p16076-2012-12-31.pdf (application/pdf)

Related works:
Journal Article: Testing for Cointegration in the Presence of Moving Average Errors (2012)
Working Paper: Testing for Cointegration in the Presence of Moving Average Errors (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:36076

Access Statistics for this paper

More papers in Staff General Research Papers Archive from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().