[R] autocorrelation problem with cointegration

upani1982 upananda.pani at gmail.com
Wed Sep 28 16:00:10 CEST 2011

Dear All,

I am looking for a cointegration relationship between Spot and Future Price
of commodites. The problem i am facing follows:

1. After estimating by Engle-Grranger Method, i found that the residuals are
stationary at their level I (o), which is required to fulfill the
cointegration test. But the autocorrelation problem arises, as DW statistics
is signficantly low 0.50-0.88 for various commodities. My question is shall
i go ahead with the results or not. 

2. When i use Johansens Method i found at least one cointegrtion relation.
But i am confused with lag selection criteria. I use VAR to select the
lagselection criteria. But there is autocorrelation problem with the lags it
is providing for AIC. Whether i should take first difference of the price
level to estimate the VAR, then how to use the same lag selection criteria,
when i am using price series in levels to estimate the cointegration by
johansen method. 

Looking forward for your help

With sincere regards,

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