Can a cointegration test be applied to a stationary variable?

Can a cointegration test be applied to a stationary variable?

Cointegration exists if a linear combination of two time series is stationary. Question: Can I theoretically apply the cointegration test to two stationary variables (trend-stationary, at level)? I would assume that a linear combination of two I (0) time series must be stationary, too.

Which is an example of a cointegration method?

Cointegration is a statistical method used to test the correlation between two or more non-stationary time series in the long-run or for a specified time period. The method helps in identifying long-run parameters or equilibrium for two or more sets of variables.

When to use cointegration in a time series?

This is where cointegration comes into play. The focus of cointegration analysis is to search for a linear combination of the time series that has a lower order of integration than the original series.

When do you use cointegration in linear regression?

When the time series are integrated of order one (or higher), standard linear regression analysis may produce spurious results; in particular, we may erroneously find that one variable is statistically significant for explaining the other variable ( Granger and Newbold 1974) [1]. This is where cointegration comes into play.

Can a series of i ( 0 ) be cointegrated?

Two series of different orders of integration will never be cointegrated. Two series both being I (0) cannot be cointegrated. Two series both being I ( d) for d ≥ 1 can be cointegrated, but they don’t have to. Only I ( d) series with d ≥ 1 can enter the cointegration relationship.

What to do if both variables are i ( 0 )?

If the variables are stationary, I (0), then we can rely on standard linear regression analysis and test, for example, whether one variable is a significant predictor of the other variable.

Can a i ( 0 ) and I ( 1 ) timeseries be cointegrated?

A I(0) and a I(1) timeseries can not be cointegrated. There is no linear combination of the timeseries that is stationary. And the definition of cointegration is if there is a combination of them that is stationary, they’re cointegrated.

Can a two series of integration be cointegrated?

Two series of different orders of integration will never be cointegrated. Two series both being I (0) cannot be cointegrated. Two series both being I (d) for d ≥ 1 can be cointegrated, but they don’t have to. The case of more than two series: