I just performed a Johansen Co-integration test on two stocks.
The results I get are:
r0 r1 t1 true false
I am using Matlab. Can someone interpret these for me?
If I have understood the test properly, they are a good correlated pair. With Mean reversion.
Are they mean reverting?
Also, I have read about stationary pairs but the technical definition is a bit confusing. If possible can someone help point me in the direction to a simpler explanation? Or may be a book to start off?
Did the test again with the following result:
[h,pValue,stat,cValue,mles] = jcitest(Y)
Results Summary (Test 1)
Data: Y Effective sample size: 229 Model: H1 Lags: 0 Statistic: trace Significance level: 0.05
r h stat cValue pValue eigVal
0 0 9.6981 15.4948 0.3467 0.0411
1 0 0.0979 3.8415 0.7872 0.0004
r0 r1 t1 false false
r0 r1 t1 0.34672 0.78721
r0 r1 t1 9.6981 0.097852
r0 r1 t1 15.495 3.8415
t1 [1x1 struct] [1x1 struct]
I am trying to understand whether h=0 implies no cointegration? What exactly does the pValue tell us?
In short still trying to understand how exactly to interpret the results.
I will get onto generating the eigenvalues. And trying to understand them after this part gets clear.
Thanks for the help guys, I don't have the advantage of attending school at the moment and understanding this is very difficult.