[R-SIG-Finance] unstable cointegration vector estimates in Johansen test

[Charles Evans]

Hello Paul (Lestat?!?),

In my work, I have looked at potential cointegration between certain  
categories of ETFs and the most nearly related futures, and I have  
found wide disagreement among different cointegration tests.

Different cointegration tests have different strengths and  
weaknesses.  Because there is rarely a conclusive reason to prefer any  
particular cointegration test over all others.  Optimally, one would  
use a variety (e.g., Engle-Granger/ADF, Engle-Granger/Phillips-Perron,  
ECM, Phillips-Ouliaris [ca.po], Johansen [ca.jo]) and run with the  
consensus.  Although it could be a bit tedious, you could run your  
rolling cointegration tests using each of these and see if you get the  
same odd behavior consistently.  If you do, then that would suggest  
something interesting; if not, then it could just be an artifact of  
the specific test.

If you have access to statistics and econometrics journals, you might  
find these papers helpful:

Gregory, Allan W., Alfred A. Haug, and Nicoletta Lomuto, 2004, Mixed  
signals among tests for cointegration. Journal of Applied Econometrics  
19 (1), 89-98.

Hanck, Christoph, 2007, Mixed signals among panel cointegration tests.  
Working Paper.
https://editorialexpress.com/cgibin/conference/download.cgi?db_name=sce2007&paper_id=115

Haug, Alfred A., 1996, Tests for cointegration: A Monte Carlo  
comparison. Journal of Econometrics 71, 89-115.

Östermark, Ralf and Rune Höglund, 2000. Monte Carlo tests of  
cointegration with structural breaks. Kybernetes 29 (9/10), 1284-1297.

Östermark, Ralf and Rune Höglund, 1999. Simulating competing  
cointegration tests in a bivariate system. Journal of Applied  
Statistics 27 (7), 831-846.

HTH,

Charles Evans
cevans at chyden.net

No one ever says, "First shoot all the plumbers."
Steve Foerster

On 1 Dec 2010, at 5:45 PM, 金陈琛 wrote:

> Hi, all,
>
> a question regarding the cointegration relations (vectors) estimate  
> in the
> Johansen test:
>
> I have a data sample which is confirmed by the Johansen test as
> cointegrated, however, if I take a subsample of the whole times  
> series, each
> time add one data point and using the "ca.jo" function in R to  
> estimate the
> cointegrating vector, i.e. to do a forward recursive test, and  
> record the
> estimate beta (the first element of the vector is normalized to one,  
> beta is
> the second element), strangely at some point, beta shows  
> discontinuity-a big
> jump with sign change. This is really confusing to me as it seems  
> that the
> Johansen procedure is not robust in that one additional data could  
> cause
> dramatical change in the estimate of beta. not sure if it is problem  
> of the
> procedure or the ca.jo function, I think my data is fine (excluding  
> errors
> and outliers). has anyone seen similar things as me?
>
> Regards,
> Paul C. Jin
>
> 	[[alternative HTML version deleted]]
>
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