Testing for Cointegration with Temporally Aggregated and Mixed-Frequency Time Series

47 Pages Posted: 17 Sep 2013

See all articles by Eric Ghysels

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

J. Isaac Miller

University of Missouri at Columbia - Department of Economics

Date Written: September 2013

Abstract

We examine the effects of mixed sampling frequencies and temporal aggregation on standard tests for cointegration. We find that the effects of aggregation on the size of the tests may be severe. Matching sampling schemes of all series generally reduces size, and the nominal size is obtained when all series are skip sampled in the same way. When matching all schemes is not feasible, but when some high-frequency data are available, we show how to use mixed-frequency models to improve the size distortion of the tests. We test stock prices and dividends for cointegration as an empirical demonstration.

Keywords: cointegration, mixed sampling frequencies, residual-based cointegration test, temporal aggregation, trace test

JEL Classification: C12, C32

Suggested Citation

Ghysels, Eric and Miller, J. Isaac, Testing for Cointegration with Temporally Aggregated and Mixed-Frequency Time Series (September 2013). CEPR Discussion Paper No. DP9654, Available at SSRN: https://ssrn.com/abstract=2326518

Eric Ghysels (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://https://eghysels.web.unc.edu/

J. Isaac Miller

University of Missouri at Columbia - Department of Economics ( email )

E220 Locust Street Building
Columbia, MO Columbia 65211
United States

HOME PAGE: http://https://sites.google.com/site/millerjisaac/

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