Explanation

The analyst needs to examine cointegration when both time series have unit roots.

Key concepts:

• Unit roots: When time series are non-stationary and have stochastic trends
• Cointegration: When two or more non-stationary time series share a common stochastic trend and their linear combination is stationary
• Spurious regression: If both series have unit roots but are not cointegrated, regression results may be misleading

Why option A is correct:

• If both series have unit roots, they are non-stationary
• Regression between non-stationary series can produce spurious results
• Cointegration ensures there's a long-run equilibrium relationship
• If cointegrated, the regression is meaningful despite individual non-stationarity

Why other options are incorrect:

• Option B: If neither has unit roots, both are stationary and standard regression applies
• Option C: If only one has unit root, the series have different stochastic properties and cointegration isn't relevant