ABSTRACT
Cointegration analysis is used to examine long-term relationships among the stock markets while the other techniques are utilised in the analyses of the short-term linkages between the markets. This chapter briefly reviews the theoretical aspects and the strength and limitations of cointegration and error correction model analyses. It presents an overview and a brief comparison of the different tests of cointegration while the last subsection summarises the strengths and limitations of cointegration and error correction model analyses. As mentioned earlier, in order to implement the Johansen procedure, the likelihood ratio and Augmented Dickey-Fuller tests are first conducted to determine the optimal lag length and stationarity of each of the data series. The chapter discusses in detail the different time series techniques that are used in the book. These techniques are cointegration, error correction model, Granger-causality, forecast variance decomposition and impulse response analyses.
