Common nonstationary components of asset prices

DOI10.1016/0165-1889(88)90045-0MaRDI QIDQ1102850zbMATH OpenOpenAlexFDO

Authors Peter Bossaerts

Publication date 1988

Published in Journal of Economic Dynamics and Control (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/0165-1889(88)90045-0

zbMATH Keywords

approximate collinearitycointegrationmulti-period general equilibriumPortfolio separationtime-series canonical correlation analysis

Mathematics Subject Classification ID

Applications of statistics to economics (62P20) Economic growth models (91B62) Economic time series analysis (91B84)

Review text

Portfolio separation in a multi-period general equilibrium context implies that asset prices are collinear. In economies that do not exhibit separation, but that move close to separation, `approximate collinearity' or cointegration emerges as a statistical model of actual data. A new test for cointegration is proposed. It is based on time-series canonical correlation analysis and solves the problem of unidentified parameters under the null hypothesis and of identification of the cointegrating vectors when more than two time series are investigated. An empirical analysis of prices of five size-based portfolios and five industry-based portfolios of common stock reveals substantial evidence of cointegration.

Recommendations

• Nonparametric cointegration analysis
• Testing for cointegration using principal components methods
• Statistical analysis of cointegration vectors
• Testing for Common Trends
• Econometric tests of rationality and market efficiency

Cites work

• A canonical analysis of multiple time series
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• Asset Prices in an Exchange Economy
• Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors
• Co-Integration and Error Correction: Representation, Estimation, and Testing
• Convergence of stochastic processes
• scientific article; zbMATH DE number 3550005 (Why is no real title available?)
• Testing for Common Trends
• Time Series Regression with a Unit Root

Cited in

(9)

• On alternative state space representations of time series models
• System estimators of cointegrating matrix in absence of normalising information
• Five alternative methods of estimating long-run equilibrium relationships
• Comparison of Box-Tiao and Johansen canonical estimators of cointegrating vectors in VEC(1) models
• Generalized method of moments estimation for cointegrated vector autoregressive models
• Canonical dependency analysis based on squared-loss mutual information
• Asset prices and the fundamentals: a Q test
• Modelling the lead-lag effect between dual-class shares
• Cointegration and long-run asset allocation

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