A Time Series Paradox: Unit Root Tests Perform Poorly When Data are Cointegrated

A Time Series Paradox: Unit Root Tests Perform Poorly When Data are Cointegrated. Reed, W R. & Smith, A. Economics Letters, 151:71–74, North-Holland, 2017.

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Cointegration among time series paradoxically makes it more likely that a unit test will reject the unit root null hypothesis on the individual series. This occurs because at least one series in the system has a negative moving average component.

@article{reed2017time,
  title={A Time Series Paradox: Unit Root Tests Perform Poorly When Data are Cointegrated},
  author={Reed, W Robert and Smith, Aaron},
  journal={Economics Letters},
  volume={151},
  pages={71--74},
  year={2017},
	url={https://files.asmith.ucdavis.edu/2017_EL_RS_unitroot},
	keywords={econometrics},
	abstract={Cointegration among time series paradoxically makes it more likely that a unit test will reject the unit root null hypothesis on the individual series. This occurs because at least one series in the system has a negative moving average component.},
  publisher={North-Holland}
}

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