How to interpret Johansen Cointegration Test Eigen Matrix

freewind · Post by **freewind** » Tue Oct 04, 2011 9:10 am

Hi All,

New to this forum and happy to be a member.

I posted this message in the modeling section with no respond so maybe this section is better related to the topic.

I run a Johansen Cointegration test on 3 instruments, A B and C.

The result that I'm getting are:

R 36.7 | 18.9 | 21.1 | 25.8

1 --> 8.4 | 12.29 | 14.26 | 18.52

2 --> 0.21 | 2.7 | 3.8 | 6.6

EigenValues | EigenMatrix

0.03 --> 0.25 | 0.512 | -0.79

0.007 --> -0.96 | -0.618| 0.14

0.00017 --> 0.05 | 0.59 | 0.59

My question is how I interpret these results?How do I know there is a cointegration for the these instruments.

How to build a portfolio using the eigen vector? Which eigen vector should I choose to build my portfolio?

Tx in advance,

Alex