Cointegration Betwixt Fossil Oil As Well As Bond Yield? Not!

An explained before, the fact that these two numbers are anti-correlated produce non forbid them from existence cointegrated. And inwards fact, the Economist article plotted the unsmooth crude prices together amongst bond yield over the terminal twelvemonth together, together with they look tantalizingly to a greater extent than or less existence cointegrated.

My curiosity piqued, I proceeded to become a longer history of these information to examine.

In the graph above, I plotted the (normalized) divergence betwixt the 10-year treasury yield together with crude price. One tin flame run into that over the terminal twelvemonth together with a half, they are indeed cointegrated to a adept degree. (To run into that, uncovering the spread is range-bound, or mean-reverting, from mid-2005 to the present.) But this human relationship breaks downwardly completely over the longer history.

Though I recall that the Economist periodical is doing a disservice to its readers for plotting this graph over merely i twelvemonth together with making innuendos of linkage, it is a squeamish representative of the danger of studying cointegration over a brusk window.