Table 7 Factor Identification
|
Rank Test |
Null Hypothesis |
Cointegration of Factor and US interest rates | |
|
p-r |
r |
Emerging |
Industrial |
|
2 |
r=0 |
19.316* |
23.696* [P = 0.014] |
|
1 |
r=l |
2.945 [P = 0.422] |
7.752 [P = 0.052] |
Notes: Johansen (1988) Trace Test examines whether there is cointegration between a common factor
from Bai and Ng (2004) PANIC and US interest rates (T-Bill rate). The null of cointegrating vectors is
given by r and the number of stochastic trends by p-r. Model selected on the basis of a model reduction
procedure and residuals are reasonably well specified. P-values are in square brackets based on simulated
critical values and a Bartlett correction from Johansen (2002). Star (*) and bold indicates significant at
the 5% level.
31
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