Please pardon my newbie question. My background is strongly technical.
I am trying to find cointegrated forex pairs. According my reading and research this is the step i follow....
1) check each series for stationary (ADF test).( Not sure of the setting here, level, first difference, 2nd difference)
2) using grenger method i use y = c(1) + c(2)*x equation.
3) export tge residuals in another series.
4) check residuals for stationarity again using ADF...
1) In both cases i am not sure which one to use Level, 1st difference , or 2nd difference.
2) Most test are not cointegrated at level but stationary at 1st level.. what does this mean? Should I be doing this and in what cases?
3) if anyone knows that how will i size my positions.
Thankyou in advance...!!
For econometric discussions not necessarily related to EViews.
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