arch.unitroot.cointegration.engle_granger¶

arch.unitroot.cointegration.engle_granger(y: ndarray | Series, x: ndarray | DataFrame, trend: 'n' | 'c' | 'ct' | 'ctt' = 'c', *, lags: int | None = None, max_lags: int | None = None, method: 'aic' | 'bic' | 't-stat' = 'bic') → EngleGrangerTestResults[source]¶

Test for cointegration within a set of time series.

Parameters:¶

y: ndarray | Series¶

The left-hand-side variable in the cointegrating regression.

x: ndarray | DataFrame¶

The right-hand-side variables in the cointegrating regression.

trend: 'n' | 'c' | 'ct' | 'ctt' = 'c'¶

Trend to include in the cointegrating regression. Trends are:

• ”n”: No deterministic terms

• ”c”: Constant

• ”ct”: Constant and linear trend

• ”ctt”: Constant, linear and quadratic trends

lags: int | None = None¶

The number of lagged differences to include in the Augmented Dickey-Fuller test used on the residuals of the

max_lags: int | None = None¶

The maximum number of lags to consider when using automatic lag-length in the Augmented Dickey-Fuller regression.

method: 'aic' | 'bic' | 't-stat' = 'bic'¶

The method used to select the number of lags included in the Augmented Dickey-Fuller regression.

Returns:¶

Results of the Engle-Granger test.

Return type:¶

EngleGrangerTestResults

See also

arch.unitroot.ADF

Augmented Dickey-Fuller testing.

arch.unitroot.PhillipsPerron

Phillips & Perron’s unit root test.

arch.unitroot.cointegration.phillips_ouliaris

Phillips-Ouliaris tests of cointegration.

Notes

The model estimated is

\[Y_t = X_t \beta + D_t \gamma + \epsilon_t\]

where \(Z_t = [Y_t,X_t]\) is being tested for cointegration. \(D_t\) is a set of deterministic terms that may include a constant, a time trend or a quadratic time trend.

The null hypothesis is that the series are not cointegrated.

The test is implemented as an ADF of the estimated residuals from the cross-sectional regression using a set of critical values that is determined by the number of assumed stochastic trends when the null hypothesis is true.