More recently, Granger (1986) and Johansen and Juselius (1990) proposed to determine the existence of long-term equilibrium among selected variables through cointegration analysis, paving the way for a (by now) preferred approach to examining the economic variables-stock markets relationship. A set of time-series variables are cointegrated if they are integrated of the same order and a linear combination of them is stationary. Such linear combinations would then point to the existence of a long-term relationship between the variables. An advantage of cointegration analysis is that through building an error-correction model (ECM), the dynamic co-movement among variables and the.
