An analyst tests the two time series errors for a unit root using the Dickey-Fuller test and determines the critical values using the Engle and Granger test. The test fails to reject the null hypothesis. The most accurate conclusion is that:

A. The two series are cointegrated.
B. The two series are not cointegrated.
C. The error terms are covariance stationary.

Correct Answer: B

If the (Engler-Granger) Dickey-Fuller test fails to reject the null hypothesis, we conclude that the error terms are not covariance stationary. This means that the two series are not cointegrated. Consequently, a linear regression cannot be used.