Testing for Cointegration with Temporally Aggregated and Mixed-frequency Time Series

Eric Ghysels and J. Miller

No 1307, Working Papers from Department of Economics, University of Missouri

Abstract: We examine the effects of mixed sampling frequencies and temporal aggregation on standard tests for cointegration. While it is well known that aggregation and sampling frequency do not affect the long-run properties of time series, we find that the effects of aggregation on the size of commonly used tests may be severe. Matching sampling schemes of all series generally reduces size, and the nominal size is obtained when all series are skip-sampled in the same way -- e.g., end-of-period sampling. When matching is not feasible, the size of the likelihood-based trace test may be improved by using a mixed-frequency model rather than an aggregated model. However, a mixed-frequency strategy may not improve the size distortion of residual-based cointegration tests compared to aggregated series. We test stock prices and dividends for cointegration as an empirical demonstration of the size distortion.

Keywords: temporal aggregation; mixed sampling frequencies; cointegration; trace test; residual-based cointegration test (search for similar items in EconPapers)
JEL-codes: C12 C32 (search for similar items in EconPapers)
Pages: 31 pgs.
Date: 2013-06-28, Revised 2014-05-07
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Testing for Cointegration with Temporally Aggregated and Mixed-Frequency Time Series (2015)
Working Paper: Testing for Cointegration with Temporally Aggregated and Mixed-frequency Time Series (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1307

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