Explain Cointegration and Error Correction?

MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
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Explain Cointegration and Error Correction?

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Cointegration can be defined as a technique which is used to find a possible correlation between the time series processes in the long term. But there exists a difference between correlation and cointegration as it focuses on the spread between the two stocks whereas correlation focuses on their direction in relation to each other.

The most popular cointegration tests are Engle-Granger, the Johansen Test, and the Phillips-Ouliaris test.

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