[R-SIG-Finance] Number of data points required for Cointigration

[amol gupta]

Hi

I need help in figuring out the length of historical data that I should
use. I took stock prices(daily close) for two tickers from yahoo(200
days).I tried finding regression coefficient using PCA and I use 150 points
for PCA. I find a coefficient Beta.

Now to see whether the spread is mean reverting or not I use ADF. If I use
150 point long spread, It comes out to be nonstationary. If I use 200
points data the outcome is stationary

I again used 200 points to do the PCA and find regression. The spread comes
out to be non stationary. From all these observation *I think* that this is
not a stable relationship.

So following are my questions

   - Is there a way to decide length of historical data to use?
   - Some relationship may be more stable than others. Is there away to
   quantify it?

Any other insight in this regard will be appreciated(time frame, pairs vs
basket). I have attached the plot and the script that was used to generate
the plot.


-- 
Regards
Amol

If all the seas were ink,
And all the reeds were pens,
And all the skies were parchment,
And all the men could write,
These would not suffice
To write down all the red tape
Of this Government.
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <https://stat.ethz.ch/pipermail/r-sig-finance/attachments/20150123/a67a0136/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: Rplot.png
Type: image/png
Size: 4475 bytes
Desc: not available
URL: <https://stat.ethz.ch/pipermail/r-sig-finance/attachments/20150123/a67a0136/attachment.png>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: test3.R
Type: application/octet-stream
Size: 2242 bytes
Desc: not available
URL: <https://stat.ethz.ch/pipermail/r-sig-finance/attachments/20150123/a67a0136/attachment.obj>