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Apr 14

Play with cointegration

Posted by abiao at 15:44 | Code » Matlab | Comments(0) | Reads(10382)
Cointegration is the foundation upon which pair trading (“statistical arbitrage”) is built, basic cointegration function can be easily found in any popular statistical software package, for instance, Unit root and cointegration tests for time series data (urca) in R. Should you are interested in playing with advanced cointegration test, go there, for instance, estimating a threshold bi-variate VECM, and testing for the presence of a threshold.

Focusing on 3 publications
"Tests for parameter instability in regressions with I(1) Processes." Journal of Business and Economic Statistics (1992).

"Residual-based tests for cointegration in models with regime shifts." with Allan Gregory, Journal of Econometrics, (1996).

"Testing for two-regime threshold cointegration in vector error correction models," with Byeongseon Seo, Journal of Econometrics (2002).

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