IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v118y2013i1p189-191.html
   My bibliography  Save this article

Partial unit root and linear spurious regression: A Monte Carlo simulation study

Author

Listed:
  • Zhang, Lingxiang

Abstract

In this paper, we consider both the partial unit root and the near partial unit root processes in nonlinear transition autoregression models. Our simulations show that when these time series data are used in ordinary least squares regression, spurious regression occurs. However, if we re-estimate the regression by adding an AR(1) term, spurious regression can almost be eliminated.

Suggested Citation

  • Zhang, Lingxiang, 2013. "Partial unit root and linear spurious regression: A Monte Carlo simulation study," Economics Letters, Elsevier, vol. 118(1), pages 189-191.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:189-191
    DOI: 10.1016/j.econlet.2012.10.018
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176512005617
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2012.10.018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    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. Joon Y. Park & Mototsugu Shintani, 2005. "Testing for a Unit Root against Transitional Autoregressive Models," Vanderbilt University Department of Economics Working Papers 05010, Vanderbilt University Department of Economics.
    3. Antonio E. Noriega & Daniel Ventosa‐Santaulària, 2007. "Spurious Regression and Trending Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(3), pages 439-444, June.
    4. Clive Granger & Namwon Hyung & Yongil Jeon, 2001. "Spurious regressions with stationary series," Applied Economics, Taylor & Francis Journals, vol. 33(7), pages 899-904.
    5. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
    6. Mehmet Caner & Bruce E. Hansen, 2001. "Threshold Autoregression with a Unit Root," Econometrica, Econometric Society, vol. 69(6), pages 1555-1596, November.
    7. Tsay, Wen-Jen & Chung, Ching-Fan, 2000. "The spurious regression of fractionally integrated processes," Journal of Econometrics, Elsevier, vol. 96(1), pages 155-182, May.
    8. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    9. Uwe Hassler, 2003. "Nonsense regressions due to neglected time-varying means," Statistical Papers, Springer, vol. 44(2), pages 169-182, April.
    10. McCallum, Bennett T., 2010. "Is the spurious regression problem spurious?," Economics Letters, Elsevier, vol. 107(3), pages 321-323, June.
    11. Marmol, Francesc, 1998. "Spurious regression theory with nonstationary fractionally integrated processes," Journal of Econometrics, Elsevier, vol. 84(2), pages 233-250, June.
    12. Durlauf, Steven N & Phillips, Peter C B, 1988. "Trends versus Random Walks in Time Series Analysis," Econometrica, Econometric Society, vol. 56(6), pages 1333-1354, November.
    13. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Frédéric Branger, Philippe Quirion, Julien Chevallier, 2017. "Carbon Leakage and Competitiveness of Cement and Steel Industries Under the EU ETS: Much Ado About Nothing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Tu, Yundong, 2017. "On spurious regressions with partial unit root processes," Economics Letters, Elsevier, vol. 150(C), pages 142-145.
    3. Zhang, Lingxiang, 2018. "Spurious regressions with high-order models: A reconsideration," Economics Letters, Elsevier, vol. 168(C), pages 70-72.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chris Stewart, 2011. "A note on spurious significance in regressions involving I(0) and I(1) variables," Empirical Economics, Springer, vol. 41(3), pages 565-571, December.
    2. Noriega Antonio E. & Ventosa-Santaulària Daniel, 2011. "A Simple Test for Spurious Regressions," Working Papers 2011-05, Banco de México.
    3. Stewart, Chris, 2006. "Spurious correlation of I(0) regressors in models with an I(1) dependent variable," Economics Letters, Elsevier, vol. 91(2), pages 184-189, May.
    4. D. Ventosa-Santaulària, 2009. "Spurious Regression," Journal of Probability and Statistics, Hindawi, vol. 2009, pages 1-27, August.
    5. Kruse Robinson & Ventosa-Santaulària Daniel & Noriega Antonio E., 2017. "Changes in persistence, spurious regressions and the Fisher hypothesis," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(3), pages 1-28, June.
    6. Antonio E. Noriega & School of Economics, University of Guanajuato & Daniel Ventosa-Santaulà ria & School of Economics, University of Guanajuato, 2006. "Spurious regression and econometric trends," Computing in Economics and Finance 2006 151, Society for Computational Economics.
    7. Antonio E. Noriega & Daniel Ventosa‐Santaulària, 2007. "Spurious Regression and Trending Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(3), pages 439-444, June.
    8. 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.
    9. Antonio E. Noriega & Daniel Ventosa‐Santaulària, 2006. "Spurious Regression Under Broken‐Trend Stationarity," Journal of Time Series Analysis, Wiley Blackwell, vol. 27(5), pages 671-684, September.
    10. Mármol, Francesc, 1999. "How spurious features arise in case of fractional cointegration," DES - Working Papers. Statistics and Econometrics. WS 6349, Universidad Carlos III de Madrid. Departamento de Estadística.
    11. Phillips, Peter C.B., 2005. "Challenges of trending time series econometrics," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 68(5), pages 401-416.
    12. Noriega, Antonio E. & Ventosa-Santaulària, Daniel, 2005. "Spurious regression under deterministic and stochastic trends," MPRA Paper 58772, University Library of Munich, Germany.
    13. Hao Jin & Si Zhang & Jinsuo Zhang, 2017. "Spurious regression due to neglected of non-stationary volatility," Computational Statistics, Springer, vol. 32(3), pages 1065-1081, September.
    14. Travaglini, Guido, 2007. "The U.S. Dynamic Taylor Rule With Multiple Breaks, 1984-2001," MPRA Paper 3419, University Library of Munich, Germany, revised 15 Jun 2007.
    15. Ferson, Wayne E. & Sarkissian, Sergei & Simin, Timothy, 2008. "Asset Pricing Models with Conditional Betas and Alphas: The Effects of Data Snooping and Spurious Regression," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(2), pages 331-353, June.
    16. Wang, Kun & Gong, Qiang & Fu, Xiaowen & Fan, Xingli, 2014. "Frequency and aircraft size dynamics in a concentrated growth market: The case of the Chinese domestic market," Journal of Air Transport Management, Elsevier, vol. 36(C), pages 50-58.
    17. Sun, Yixiao, 2006. "Spurious regressions between stationary generalized long memory processes," Economics Letters, Elsevier, vol. 90(3), pages 446-454, March.
    18. Tu, Yundong, 2017. "On spurious regressions with partial unit root processes," Economics Letters, Elsevier, vol. 150(C), pages 142-145.
    19. Noriega Antonio E. & Ventosa-Santaulària Daniel, 2010. "Spurious Long-Horizon Regression in Econometrics," Working Papers 2010-06, Banco de México.
    20. Manuel Gómez Zaldivar & Oscar Manjarrez Castro & Daniel Ventosa-Santaulària, 2009. "Regresión espuria en especificaciones dinámicas," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 1-20, May.

    More about this item

    Keywords

    Partial unit root; Spurious regression; Monte Carlo simulation;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:189-191. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.