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Nonsense regressions due to time-varying means

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  • Hassler, Uwe

Abstract

Regressions of two independent time senes are considered. The variables are covariance stationary but display time-varying although not trending means. Two prominent examples are mean shifts due to structural breaks and seasonally varying means. If the variation of the means is not taken into account, this induces nonsense correlation. The asymptotic treatment is supplemented by experimental evidence.

Suggested Citation

  • Hassler, Uwe, 1999. "Nonsense regressions due to time-varying means," DES - Working Papers. Statistics and Econometrics. WS 6361, Universidad Carlos III de Madrid. Departamento de Estadística.
    • Handle: RePEc:cte:wsrepe:6361
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    References listed on IDEAS

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    1. Marmol, Francesc, 1996. "Nonsense Regressions between Integrated Processes of Different Orders," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 525-536, August.
    2. Hassler, Uwe, 1996. "Spurious regressions when stationary regressors are included," Economics Letters, Elsevier, vol. 50(1), pages 25-31, January.
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    Keywords

    Structural breaks;

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