Extreme canonical correlations and high-dimensional cointegration analysis
Accepted version
Peer-reviewed
Repository URI
Repository DOI
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Authors
Onatskiy, Alexey
Wang, Chen
Abstract
We prove that the extreme squared sample canonical correlations between a random walk and its own innovations almost surely converge to the upper and lower boundaries of the support of the Wachter distribution when the sample size and the dimensionality go to innity proportionally. This result is used to derive previously unknown analytic expressions for the Bartlett-type correction coefficients for Johansens trace and maximum eigenvalue tests in a high-dimensional VAR(1). An analysis of cointegration among a large number of log exchange rates illustrates the usefulness of our theoretical results.
Description
Keywords
High-dimensional cointegration, Extreme canonical correlations, Trace statistic, Maximum eigenvalue statistic, Bartlett correction
Journal Title
Journal of Econometrics
Conference Name
Journal ISSN
0304-4076
1872-6895
1872-6895
Volume Title
Publisher
Elsevier BV