Cointegration (?) of two time series
Posted: Tue Jun 11, 2013 10:48 pm
Hi guys,
I'm struggeling with a problem regarding my thesis. I have two time-series, momentum and dividend yield. When I run a ADF test on momentum it says 'no unit root'
but on dividend yield, it do has a unit root.
When I take the first difference of log dividend yield, it no longer has a unit root.
Next to that, when I run a regression on momentum with dividend yield (first difference), and do an ADF test on the residuals, it rejects a unit root, which implies the
two time series are cointegrated (?) according to my Empirical Finance classes.
Can anyone confirm/reject this and tell me how to proceed?
Many thanks!
I'm struggeling with a problem regarding my thesis. I have two time-series, momentum and dividend yield. When I run a ADF test on momentum it says 'no unit root'
but on dividend yield, it do has a unit root.
When I take the first difference of log dividend yield, it no longer has a unit root.
Next to that, when I run a regression on momentum with dividend yield (first difference), and do an ADF test on the residuals, it rejects a unit root, which implies the
two time series are cointegrated (?) according to my Empirical Finance classes.
Can anyone confirm/reject this and tell me how to proceed?
Many thanks!