Discussion in 'Economics' started by clarodina, Feb 21, 2011.
Anyone knows the math on how to compute the cointegration percentage on catalystcorner.com?
Their glossary only says, "What Does Cointegration Mean? Cointegration is the statistical confidence that a pair will revert to the mean"
Their demo says something about likelihood of reverting to the mean.
I've haven't asked them, but I suspect it is something simple like the ratio of coefficient in the Engle-Granger cointegration.
I keep reading academic papers hoping to find someone relating the coefficients in the Error Correction Model based on the Johansen procedure with a rate of convergence/reversion. Given my half-remembered ODE coursework, one should at least be able to say that from the current perturbation, here is an exponential decay function to the steady state if there are no further perturbations.
The fact that no one has provided makes me suspect that it would have no bearing on real market data. It doesn't seem that hard to find out though if I just had the time.
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