The power of lambda max

This paper considers likelihood ratio (LR) cointegration rank tests in vect or autoregressive models (VAR); the local power of the most widely used LR 'trace' test is compared with the LR 'lamda max' test. It is found that nei ther test uniformily dominates the other one. Moreover it is shown that the asymptotic properites of the estimator of the cointegration rank based on the trace test are shared by a similar estimator based on the lambda max te st. These results indicate that both tests are admissible.