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Is the Spurious Regression Problem Spurious?

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  • Bennett T. McCallum

Abstract

So-called “spurious regression” relationships between random-walk (or strongly autoregressive) variables are generally accompanied by clear signs of severe autocorrelation in their residuals. A conscientious researcher would therefore not end an investigation with such a result, but would likely re-estimate with an autocorrelation correction. Simulations show, for several typical cases, that the test-rejection statistics for the re-estimated relationships are very close to the true values, so do not yield results of the spurious type.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15690.

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Date of creation: Jan 2010
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Publication status: published as McCallum, Bennett T., 2010. "Is the spurious regression problem spurious?," Economics Letters, Elsevier, vol. 107(3), pages 321-323, June.
Handle: RePEc:nbr:nberwo:15690

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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. Granger, Clive W.J. & Hyung, Namwon & Jeon, Yongil, 1998. "Spurious Regressions with Stationary Series," University of California at San Diego, Economics Working Paper Series qt7r3353t8, Department of Economics, UC San Diego.
  3. Bennett T. McCallum, 1993. "Unit Roots in Macroeconomic Time Series: Some Critical Issues," NBER Working Papers 4368, National Bureau of Economic Research, Inc.
  4. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
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Cited by:
  1. Gueorgui I. Kolev, 2011. "The "spurious regression problem" in the classical regression model framework," Economics Bulletin, AccessEcon, vol. 31(1), pages 925-937.
  2. Martínez-Rivera, Berenice & Ventosa-Santaulària, Daniel, 2012. "A comment on ‘Is the spurious regression problem spurious?’," Economics Letters, Elsevier, vol. 115(2), pages 229-231.
  3. Zhang, Lingxiang, 2013. "Partial unit root and linear spurious regression: A Monte Carlo simulation study," Economics Letters, Elsevier, vol. 118(1), pages 189-191.
  4. 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.
  5. Sollis, Robert, 2011. "Spurious regression: A higher-order problem," Economics Letters, Elsevier, vol. 111(2), pages 141-143, May.

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