Re: [Gretl-users] Creating cointegrated series

On 07.03.2012 23:18, John C Frain wrote: > 1) I think you will find that > > vecm 1 1 Z2 Z1 --rc > > estimates your system very well.  I dont see the problem. I think Talha means to see unit roots in the output; which is good news, however, since the data were constructed to have them. > > 3) If the series are not cointegrated then the residuals from the > cointegrating regression may have a stochastic trend -- thus the > specification of the test. Hayashi has a very good account of the > Engle Granger cointegration test. No, the (OLS) residuals will have mean zero. (Brownian bridge instead of brownian motion IIRC.) So I tend to agree this could be a bug. BUT: First due to sample shortening because of lags the exact mean-zero property may be lost, which complicates things. And I think the model representation of the residual-based-ADF-test in step 4 may just be wrong, with the result being correct. You can easily check that by manually replicating the steps.

hth, sven _______________________________________________ Gretl-users mailing list Gretl-users(a)lists.wfu.edu http://lists.wfu.edu/mailman/listinfo/gretl-users