What is Cointegration Test?

What is Cointegration?

A cointegration test is used to establish if there is a correlation between several time series in the long term. The concept was first introduced by Nobel laureates Robert Engle and Clive Granger in 1987 after British economist Paul Newbold and Granger published the spurious regression concept.

Cointegration tests identify scenarios where two or more non-stationary time series are integrated together in a way that they cannot deviate from equilibrium in the long term. The tests are used to identify the degree of…