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On determination of cointegration ranks

Pan, J. and Li, Q. and Yao, Q. and , National Basic Research Program of China (Funder) and , EPSRC research grant of UK (Funder) (2009) On determination of cointegration ranks. Statistics and Its Interface, 2 (1). pp. 45-56. ISSN 1938-7989

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    Abstract

    We propose a new method to determine the cointegration rank in the error correction model (ECM). The cointegration rank, together with the lag order, is determined by a penalized goodness-of-fit measure. We show that the estimated cointegration vectors are consistent with a convergence rate T, and our estimation for the cointegration rank is consistent. Our approach is more robust than the conventional likelihood based methods, as we do not impose any assumption on the form of the error distribution in the model. Furthermore we allow the serial dependence in the error sequence. The proposed methodology is illustrated with both simulated and real data examples. The advantage of the new method is particularly pronounced in the simulation with non-Gaussian and/or serially dependent errors.

    Item type: Article
    ID code: 13644
    Keywords: cointegration, error correction models, penalized goodness-of-fit criteria, Mathematics, Statistics and Probability, Applied Mathematics
    Subjects: Science > Mathematics
    Department: Faculty of Science > Mathematics and Statistics
    Related URLs:
    Depositing user: Mrs Carolynne Westwood
    Date Deposited: 12 Jan 2010 15:36
    Last modified: 05 Sep 2014 13:47
    URI: http://strathprints.strath.ac.uk/id/eprint/13644

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