On Sample Size Requirements for Johansen’s Test

Abstract

Type I error rates for the Johansen test were estimated using simulated data for a variety of conditions. The design of the experiment was a 2 × 2× 2× 3× 9× 3 factorial. The factors were (a) type of distribution, (b) number of dependent variables, (c) number of groups, (d) ratio of the smallest sample size to the number of dependent variables, (e) sample size ratios, and (f) degree of heteroscedasticity. The results indicate that Type I error rates for the Johansen test depend heavily on the number of groups and the ratio of the smallest sample size to the number of dependent variables. Type I error rates depend to a lesser extent on the distribution types used in the study. Based on the results, sample size guidelines are presented.