Journal
JOURNAL OF APPLIED STATISTICS
Volume 42, Issue 8, Pages 1759-1769Publisher
TAYLOR & FRANCIS LTD
DOI: 10.1080/02664763.2015.1005583
Keywords
C12; C22; wavelet analysis; spectral analysis; time series models; econometric methods; integrated process; unitroots
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In a recent paper, Leong and Huang [6] proposed a wavelet-correlation-based approach to test for cointegration between two time series. However, correlation and cointegration are two different concepts even when wavelet analysis is used. It is known that statistics based on non-stationary integrated variables have non-standard asymptotic distributions. However, wavelet analysis offsets the integrating order of non-stationary series so that traditional asymptotics on stationary variables suffices to ascertain the statistical properties of wavelet-based statistics. Based on this, this note shows that wavelet correlations cannot be used as a test of cointegration.
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