Munich Personal RePEc Archive

Spurious Regression

Ventosa-Santaulària, Daniel (2008): Spurious Regression. Published in: Journal of Probability and Statistics , Vol. 2009, No. 802975 (2009)

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Abstract

The spurious regression phenomenon in Least Squares occurs for a wide range of Data Generating Processes, such as driftless unit roots, unit roots with drift, long memory, trend and broken-trend stationarity. Indeed, spurious regressions have played a fundamental role in the building of modern time series econometrics and have revolutionized many of the procedures used in applied macroeconomics. Spin-offs from this research range from unit-root tests to cointegration and error-correction models. This paper provides an overview of results about spurious regression, pulled from disperse sources, and explains their implications.

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