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Spurious Regression Between I(1) Processes With Infinite Variance Errors

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  • Tsay, Wen-Jen

Abstract

This paper considers spurious regression between integrated processes with stable errors. Our results show that the t-ratios diverge at the rate of √T, which is identical to what Phillips (1986, Journal of Econometrics 33, 311–340) has obtained for the Gaussian case. Therefore, it is the long memory in the dependent variable and regressors, instead of the moment conditions of the error terms, that causes the spurious regression.

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  • Tsay, Wen-Jen, 1999. "Spurious Regression Between I(1) Processes With Infinite Variance Errors," Econometric Theory, Cambridge University Press, vol. 15(4), pages 622-628, August.
    • Handle: RePEc:cup:etheor:v:15:y:1999:i:04:p:622-628_15
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    Cited by:

    1. Chu Ba & Kozhan Roman, 2010. "Spurious Regressions of Stationary AR(p) Processes with Structural Breaks," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 15(1), pages 1-25, December.
    2. 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.
    3. Granger, Clive W.J., 2012. "Useful conclusions from surprising results," Journal of Econometrics, Elsevier, vol. 169(2), pages 142-146.

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