Comment on Live Example -1

Kaushal commented on 18 Oct 2018, 08:08 AM

“What if Stock A with Stock B is not stationary, but instead Stock A is stationary with stock B & C as a combined entity?”
Does the statement mean that we have two independent variables and one dependent variable and if we regress stock A(dependent) against stock B and stock C combined we can generate one column of residuals and hence by that we can check for cointegration by the equation Y=mX + nZ + constant…where Y is stock A ,X is B and Z is C, m and n are betas for B and C and the constant may be considered as equivalent to intercept???

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