# Testing for Common Trends

**James H. Stock****Mark W. Watson**

CiteWeb id: 20120000105

CiteWeb score: 2464

Cointegrated multiple time series share at least one common trend. Two tests are developed for the number of common stochastic trends (i.e., for the order of cointegration) in a multiple time series with and without drift. Both tests involve the roots of the ordinary least squares coefficient matrix obtained by regressing the series onto its first lag. Critical values for the tests are tabulated, and their power is examined in a Monte Carlo study. Economic time series are often modeled as having a unit root in their autoregressive representation, or (equivalently) as containing a stochastic trend. But both casual observation and economic theory suggest that many series might contain the same stochastic trends so that they are cointegrated. If each of n series is integrated of order 1 but can be jointly characterized by k > n stochastic trends, then the vector representation of these series has k unit roots and n — k distinct stationary linear combinations. Our proposed tests can be viewed alterna...

**Testing for Common Trends**" is placed in the Top 10000 of the best publications in CiteWeb. Also in the category Mathematics it is included to the Top 1000. Additionally, the publicaiton "

**Testing for Common Trends**" is placed in the Top 1000 among other scientific works published in 2012.

James H. Stock, Mark W. Watson,

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