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Table 1 Cointegration test results: yellow portfolio (with less than zero correlations)

From: Is a correlation-based investment strategy beneficial for long-term international portfolio investors?

 

Kao panel cointegration

Pedroni panel co-integration statistics

Johansen panel co-integration

trace statistics

ADF t-stat

Panel v

Panel rho

Panel PP

Panel ADF

Group rho

Group PP

Group ADF

None

1

2

3

LA

Model 1

0.4160

− 0.6238

2.1795

2.6466

1.9126

1.0996

2.7184

2.0212

42.30*

43.33**

–

–

Model 2

0.3969

− 0.3749

2.5042

3.1265

2.4914

− 0.1579

1.5407

1.2916

32.23

5.569

18.74

–

Model 3

− 1.6241***

0.6371

− 6.6226***

− 2.2712***

− 5.1189***

− 16.9983***

− 7.4989***

− 8.1826***

185.3***

11.59

5.094

15.72

Model 4

0.3497

− 1.3825

3.6101

4.6507

4.1339

1.2067

2.6241

2.9529

305.7*

29.65*

5.868

19.56

Model 5

0.1736

− 1.0190

3.0244

4.0489

3.5063

1.3114

2.9784

2.6473

206.7

21.87

9.896

24.88

Asia

Model 1

13.5631***

− 3.6780

6.6961

12.6149

11.3547

5.5517

8.6540

7.2703

32.12

49.66

–

–

Model 2

11.3911***

− 1.6565

4.0094

8.2164

2.4923

4.6895***

7.4666

4.1972***

25.23

16.30

41.87

–

Model 3

7.7204***

− 1.7432

− 14.5937***

− 5.3256***

− 0.8439

− 30.6208***

− 10.0924***

− 2.7905***

430.9

16.41

13.46

40.16

Model 4

11.3327***

− 2.7828

4.9511

9.3655

4.4256

6.1118

9.0771

6.6113

533.6***

25.23

16.29

44.16

Model 5

10.7290***

− 3.0391

6.0418

11.6179

6.6078

5.7789

9.2017

5.8151

289.6***

33.18

20.25

44.43

MENA

Model 1

− 2.8796***

− 2.4877

1.3300

− 0.2854

0.6072

3.4566

0.9096

2.0721

57.91

72.02

–

–

Model 2

− 3.1270

− 3.3706

2.8525

1.4027

2.3832

5.2727

2.7841

3.9132

23.94

10.55

28.19

–

Model 3

− 4.7220***

− 3.5705

− 33.7749***

− 19.1868***

− 9.0839***

− 34.4190***

− 12.6639***

− 7.0891***

797.5***

19.21

9.861

27.34

Model 4

− 3.0597***

− 4.2968

4.0298

3.2197

4.7451

6.3704

4.8312

6.6672

727.6***

24.33

10.69

30.00

Model 5

− 2.4614***

− 4.1531

3.6532

3.1554

3.9341

6.5984

5.5017

6.3870

423.4***

43.04

20.30

45.52

CEE

Model 1

2.1718***

− 1.8941

1.2917

1.2650

1.3205

4.3549

4.8544

5.2865

44.90

45.95

–

–

Model 2

1.6542***

0.1380

1.8323

1.7037

1.3980

2.9751

3.0016

3.1958

68.20***

14.21

50.91

–

Model 3

− 2.0754

2.5500***

− 88.3206***

− 34.8370***

− 20.7549***

− 13.2459***

− 2.5790***

− 1.3759***

358.2***

39.82

14.15

49.55

Model 4

1.6099**

− 1.1975

3.2900

3.3722

3.3318

2.2373

1.7243

4.9906

449.1***

66.14**

14.84

51.49

Model 5

1.6162***

− 0.5555

2.1435

1.9935

1.5829

4.1959

4.8715

4.9717

319.4***

63.22**

26.81

38.90

  1. This table presents results from three cointegration tests, namely Kao (1999), Maddala and Wu (1999), and Pedroni (1999, 2004). The Pedroni and Kao are single-equation tests while the Maddala and Wu cointegration test uses a system of equations. They all test the null of no cointegration. To examine the stationarity of the residuals, Kao uses the standard ADF test while Pedroni uses a variety of tests, including the ADF test. For the Maddala and Wu test, we report the trace test to indicate the number of cointegration relations among variables of a system. Relationships in five models (1–5) (in column 1) were tested region-wise, after incorporating portfolios developed under the regionally biased strategy. The long-term relationship depicted in Eq. (1): \({P}_{it}={\delta }_{1i}+ {\theta }_{1i}{P}_{jt}+{\mu }_{it}\);in Eq. (2): \({P}_{it}={\delta }_{1i}+ {\theta }_{1i}{P}_{jt}+ {\theta }_{2i}{S\&P500}_{it}+{\mu }_{it}\) in Eq. (3) as \({P}_{it}={\delta }_{1i}+ {\theta }_{1i}{\Delta P}_{j,r-i,t }+ {\theta }_{2i}{S\&P500}_{it}+{\theta }_{3i}{Brent}_{it}+{\mu }_{it}\); in Eq. (4): \({P}_{it}={\delta }_{1i}+ {\theta }_{1i}{\Delta P}_{j,r-i,t }+ {\theta }_{2i}{S\&P500}_{it}{+ \theta }_{3i}{sentiments}_{it}+{\mu }_{it};\) and finally in Eq. (5): \({P}_{it}={\delta }_{1i}+ {\theta }_{1i}{\Delta P}_{j,r-i,t }+ {\theta }_{2i}GFC*{S\&P500}_{it}+{\theta }_{3i}NGFC*{S\&P500}_{it}{+\mu }_{it}\). Here, \({P}_{it}\) is each of the six Latin American nations; \({\Delta P}_{j,r-i,t}\) is the yellow portfolio of MSCI of other corresponding correlated emerging and frontier countries of the Asian, Latin American, MENA and CEE markets; the yellow colour portfolio highlight portfolio of each region with i) stock having correlation less than zero; \({S\&P500}_{it}\) is the price index to the US market, \({Brent}_{it}\) is international Brent oil price series and \({sentiments}_{it}\) is the global sentiment index represented by Baker and Wurgler (2006) sentiment index. *, **, *** denotes significance at 10, 5, and 1 percent or better respectively
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