Cointegration

A cointegration test is utilized to build up if there is a relationship between few time arrangements in the long haul. The idea was first presented by Nobel laureates Robert Engle and Clive Granger, in 1987, after British financial expert Paul Newbold and Granger distributed the false relapse idea. Cointegration tests distinguish situations where at least two non-fixed time arrangement are coordinated together such that they can't veer off from harmony in the long haul. The tests are utilized to recognize the level of affectability of two factors to a similar normal cost over a predetermined timeframe. Before the presentation of cointegration tests, financial analysts depended on direct relapses to discover the connection between a few time arrangement forms. Nonetheless, Granger and Newbold contended that straight relapse was a mistaken methodology for examining time arrangement because of the chance of creating deceptive relationship. A deceptive relationship happens when at least two related factors are regarded causally related because of either an incident or an obscure third factor. A potential outcome is a deceptive factual connection between a few time arrangement factors.