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Question 1 (5 points) Suppose you had data on stock price indices (X and Y)...

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Question 1 (5 points) Suppose you had data on stock price indices (X and Y) in two different countries. You are interested in causality issues and want to find out whether movements in stock prices in one country affect stock prices in another. What is the first test in svahanasis? The first test is for the presence of cointegration The first test is for the presence of a unit root. If unit oot is present the series are stationary and can be used in the levels for further analysis. The first test is for the presence of a unit root. If prices are non-stationary we test for cointegration. If there is no cointegration we can difference the series to make the stationary The first test is for the presence of a unit root. If prices are stationary we test for cointegration. If there is cointegration we can difference the series to make then stationary

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