Answer: A When both time series have unit roots

## 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

Author: LeetQuiz Editorial Team