Stationarity of time series and the problem of spurious regression
AbstractThe goal of this paper was to introduce some general issues of non-stationarity for practitioners, students and beginning researchers. Using elementary techniques we examined the effect of non-stationary data on the results of regression analysis. We further shoved the effect of larger sample sizes on the spuriousness of regressions and we also examined the well known “rule of thumb” of how to identify spurious regressions. We also demonstrated the problem of spurious regression on a practical example, using closing prices of stock market indices from CEE markets.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27926.
Date of creation: 30 Sep 2009
Date of revision:
stationarity; time series data; various unit root tests; spurious regression; the R-squared and the Durbin – Watson statistics “rule of thumb”; CEE stock markets;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
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