Hi,
I'm trying to learn about cointegration, specifically about how to use "ca.jo"
for finding the cointegration basis. The data is that of FX rates and M1 supply
difference. I need help understanding the below two points:
1. Seasonal variables:
-> What is the importance of season parameter apart from seemingly obvious
explanation in the documentation; in other words, should it be understood as
equivalent of Seasonal ARIMA vs ARIMA where we take care of the seasonal unit
roots?
-> Should the parameter be set to the value at which the Y_t under question is
sampled? Or should it be based on some common frequency derived from individual
Y_t component series's periodicity as found from their periodogram (spectrum
command in R)?
-> Should the season paramater must be greater then 2? As by spectrum of M1 and
FX rate series, I was getting the prominent frequencies for both variables as 2
and its multiples, but got below error, which got resolved as soon as I used
anything >2:
"Error in while (nrow(dums) < N) { : argument is of length zero"
Background: I tried checking for cointegration between two monthly series,
taking the "season" parameter as 12 (as I had monthly data) first time and
without having any season parameter the second. The order of cointegration in
both the cases was 1. But further, when I tried fitting VECM and using vec2var
created 6 months ahead forecasts and calculated MAPE (Mean Absolute Percentage
Error), the MAPE for ca.jo output without season parm specified was better then
with season parameter - which lead me to the above confusions.
2. ecdet paramter:
The awesome book as well as documentation describe this parameter nicely. But
when I use it, the message that comes in the output is a bit confusing:
> cv1.m1.bop = ca.jo(cor2,type="trace",ecdet="const",K=2,season=12,dumvar=bop)
> summary(cv1.m1.bop)
######################
# Johansen-Procedure #
######################
Test type: trace statistic , without linear trend and constant in cointegration
.
.
.
The confusion is that I'm interested in finding out presence of "restricted
constant", so I used "ecdet='const'". Am I correct in doing so?
Apologies if this is not the right forum for asking these questions and also
for the long mail.
Thanks & Regards,
Gunjan Narulkar,
Ist Year M. Mgmt., DOMS,
Indian Institute of Science
Contact: +91-99007-40404
LinkedIn: in.linkedin.com/pub/gunjan-narulkar/19/a3b/521
_______________________________________________
[email protected] mailing list
https://stat.ethz.ch/mailman/listinfo/r-sig-finance
-- Subscriber-posting only. If you want to post, subscribe first.
-- Also note that this is not the r-help list where general R questions should
go.
