Read Cointegration table

[Rock N Rolla]

Hello!

I would like to know how to read the Cointegration Table as I have some difficulties in explaini it.

According to my cointegration test I reject the hypothesis at the 5% and 1% level and the trace test indicates 1 cointegrating equation at both 5% and 1% level, which is confirmed by the max. Eigenvalue statistic. What does this mean? Are the stock indices cointegrated?

[SnakeCharmerII]

It depends on WHAT null hypothesis you are rejecting. I assume that you're talking of the Johansen test, so the null could be

Ho (1): No cointegration
Ho (2): At least 1 cointegration relationship
Ho (3): At least 2 cointegration relationship
...

So, if your variables were cointegrated with rank 1 (one cointegration relation), then you're going to reject the Ho (1) but you wont be able to reject Ho(2) at conventional significance leves.

(In your case, it seems that there is one cointegrating relationship)