Universal Cointegration and Its Applications

Chengyi Tu; Ying Fan; Jianing Fan

doi:10.1016/j.isci.2019.08.048

Universal Cointegration and Its Applications

iScience. 2019 Sep 27:19:986-995. doi: 10.1016/j.isci.2019.08.048. Epub 2019 Aug 30.

Authors

Chengyi Tu¹, Ying Fan², Jianing Fan³

Affiliations

¹ School of Ecology and Environmental Science, Yunnan University, Kunming, China; Department of Environmental Science, Policy, and Management, University of California, Berkeley, Berkeley, CA, USA. Electronic address: chengyitu@berkeley.edu.
² College of Geography and Environment, Shandong Normal University, Jinan, China.
³ School of Economics and Management, Beijing Information Science & Technology University, Beijing, China.

Abstract

Cointegration focuses on whether the long-term linear relationship between two or more time series is stationary even if this linear relationship does not exist or is not strong for the short term. Identifying the potential cointegration is important for economics, ecology, meteorology, neuroscience, and much more. Classic methods only considered or restricted in cointegration where the order of integration of all time series is 1. We introduce a method based on searching the vector to minimize the absolute correlation of convergent cross-mapping that can explore the universal cointegration and its extent. The proposed method can be applied to time series whose order of integration is not 1, cases that are not covered by classic cointegration. The proposed method is first illustrated and validated through time series generated by mathematical models in which the underlying relationships are known and then applied to three real-world examples.

Keywords: Computational Mathematics; Global Change; Interdisciplinary Physics.