ADF Vs Johansen Test

AI & Machine learning
1

Hi



Can you help me figure out which on has higher statistical power between ADF and Johansen Test if applied for testing Cointegration for pair.(Only 2) 



Thanks

Aparna

 

2

Hi!

Between the CADF and the Johansen Test, the Johansen Test is more flexible for finding cointegration than CADF since we can analyze more than 2 assets with it.



As you mentioned only a pair of assets, either is good enough. However, should you develop your existing strategy into something more complex, it's better to go with the Johansen Test.



Hope this helps!