EXPLORING THE METHODS OF COINTEGRATION PROCEDURES USING STOCK PRICES

Stationary models are an essential class of stochastic models for describing time series data which have received a great attention. In reality, however, business and economic data are non-stationary multivariate time series that are often better understood by cointegration analysis. This study inve...

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Bibliographic Details
Published in:AU E-Journal of Interdisciplinary Research 2017-01, Vol.2 (1)
Main Authors: Ismail, Adeleke, Adesina, Olumide S, Abegunrin, A O
Format: Article
Language:English
Subjects:
Cointegration analysis
Stock prices
Time series
Online Access:Get full text
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Summary:Stationary models are an essential class of stochastic models for describing time series data which have received a great attention. In reality, however, business and economic data are non-stationary multivariate time series that are often better understood by cointegration analysis. This study investigates the cointegration testing methods of Engle-Granger two-step estimation technique, Phillip-Ouliaris test, and Johansen's multivariate test. The stock prices of selected companies in Nigeria from 2008-2014 are used in the study. Findings revealed that the three techniques produced different results and that the Johansen's method and Engle-Granger two steps procedure exhibits higher efficiencies than Phillips-Ouliaris methods but their efficiency is dependent on the number of variables and correct selection.
ISSN:2408-1906