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What is the intuition behind cointegration?

Although having a postgrad degree in mathematics, I haven't used any maths 'in anger' for quite a few years now, so I am quite rusty (actually, VERY rusty).

I am looking for a gentle introduction to cointegration, that will prepare me with the fundamentals/foundation before I start to read Market Models by Carol Alexander (which I bought a few years ago!).

Could someone suggest a link to such a simple introductory note. Preferably, one which does not make too much of an assumption on the mathematical background of the reader.


marked as duplicate by Andrey Taptunov, Joshua Ulrich, Mike Spivey, Ryogi, Steve Severance Feb 3 '12 at 23:31

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  • $\begingroup$ This seems like something Google or Wikipedia should be able to answer. Is there something specific you're having trouble understanding? $\endgroup$ – chrisaycock Jan 31 '12 at 14:30

I'm not sure this post will survive, but Wikipedia's treatment is fairly gentle.


Also, EP Chan did a simple paper on cointegration as well.



This book by Richard Harris is a great intro.

The book is short but informative and technically rigorous. As a primer, it's fine. For the advanced student or professional it's obviously lacking, but that's the definition of a primer. ECM and VECM are particularly well treated.


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