A CONVERGENT t-STATISTIC IN SPURIOUS REGRESSIONS
AbstractThis paper investigates the asymptotic properties of the t-statistic in spurious regressions when the bandwidth in the estimation of the heteroskedasticity and autocorrelation consistent (HAC) standard error is set proportional to the sample size. Using autocovariances of large lags, the so-defined HAC estimator is capable of capturing the high persistence of the regressor and regression residuals. It is shown that the resulting t-statistic converges to a nondegenerate limiting distribution for all cases of spurious regressions considered in the literature. This finding sheds some new light on the nature of spurious regressions.I am very grateful to Bruce Hansen and two anonymous referees for helpful comments and suggestions. All remaining errors and omissions are mine alone.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Econometric Theory.
Volume (Year): 20 (2004)
Issue (Month): 05 (October)
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Other versions of this item:
- Sun, Yixiao, 2003. "A Convergent t-statistic in Spurious Regressions," University of California at San Diego, Economics Working Paper Series qt150457tv, Department of Economics, UC San Diego.
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