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Spurious regression and lurking variables

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  • García-Belmonte, Lizeth
  • Ventosa-Santaulària, Daniel

Abstract

We present asymptotic and finite-sample arguments to study the spurious regression problem. This problem may be solved by introducing a lurking variable in the specification even if it is merely a proxy variable. Moreover, this approach is also valid if the lurking variable is a trending mechanism, as when the spurious regression is due to nonstationarities in the variables.

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Bibliographic Info

Article provided by Elsevier in its journal Statistics & Probability Letters.

Volume (Year): 81 (2011)
Issue (Month): 12 ()
Pages: 2004-2010

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Handle: RePEc:eee:stapro:v:81:y:2011:i:12:p:2004-2010

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Related research

Keywords: Spurious regression; Lurking variable; Trending mechanism;

References

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  1. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  2. Peter C.B. Phillips, 1985. "Understanding Spurious Regressions in Econometrics," Cowles Foundation Discussion Papers 757, Cowles Foundation for Research in Economics, Yale University.
  3. Kim, Tae-Hwan & Lee, Young-Sook & Newbold, Paul, 2004. "Spurious regressions with stationary processes around linear trends," Economics Letters, Elsevier, vol. 83(2), pages 257-262, May.
  4. Andrew Kliman, 2008. "What is spurious correlation? a reply to Díaz and Osuna," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 31(2), pages 345-356, December.
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Cited by:
  1. Jin, Hao & Zhang, Jinsuo & Zhang, Si & Yu, Cong, 2013. "The spurious regression of AR(p) infinite-variance sequence in the presence of structural breaks," Computational Statistics & Data Analysis, Elsevier, vol. 67(C), pages 25-40.

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