Spurious regression and econometric trends
This paper analyses the asymptotic and finite sample implications of different types of nonstationary behavior among the dependent and explanatory variables in a linear spurious regression model. We study cases when the nonstationarity in the dependent and explanatory variables is deterministic as well as stochastic. In particular, we derive the order in probability of the t-statistic in a spurious regression equation under a variety of empirically relevant data generation processes, and show that the spurious regression phenomenon is present in all cases when at least one of the variables behaves in a nonstationary way. Simulation experiments confirm our asymptotic results
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||04 Jul 2006|
|Date of revision:|
|Contact details of provider:|| Web page: http://comp-econ.org/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Noriega, Antonio E. & Ventosa Santaulària, Daniel, 2005.
"Spurious regression under broken trend stationarity,"
58768, University Library of Munich, Germany.
- 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, 09.
- Daniel Ventosa-Santaularia & Antonio E. Noriega, 2005. "Spurious regression under broken trend stationarity," Computing in Economics and Finance 2005 186, Society for Computational Economics.
- Gunter Coenen & Juan Luis Vega, 2000.
"The Demand for M3 in the Euro Area,"
Econometric Society World Congress 2000 Contributed Papers
0976, Econometric Society.
- Entorf, Horst, 1997. "Random walks with drifts: Nonsense regression and spurious fixed-effect estimation," Journal of Econometrics, Elsevier, vol. 80(2), pages 287-296, October.
- Robin L. Lumsdaine & David H. Papell, 1997.
"Multiple Trend Breaks And The Unit-Root Hypothesis,"
The Review of Economics and Statistics,
MIT Press, vol. 79(2), pages 212-218, May.
- Tom Doan, . "LPUNIT: RATS procedure to implement Lumsdaine-Papell unit root test with structural breaks," Statistical Software Components RTS00110, Boston College Department of Economics.
- Perron, Pierre, 1997.
"Further evidence on breaking trend functions in macroeconomic variables,"
Journal of Econometrics,
Elsevier, vol. 80(2), pages 355-385, October.
- Perron, P., 1990. "Further Evidence On Breaking Trend Functions In Macroeconomics Variables," Papers 350, Princeton, Department of Economics - Econometric Research Program.
- Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Universite de Montreal, Departement de sciences economiques.
- Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- 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.
- Peter C. B. Phillips, 1998. "New Tools for Understanding Spurious Regressions," Econometrica, Econometric Society, vol. 66(6), pages 1299-1326, November.
- Vogelsang, T.I. & Perron, P., 1991.
"Nonstationary and Level Shifts With An Application To Purchasing Power Parity,"
359, Princeton, Department of Economics - Econometric Research Program.
- Perron, Pierre & Vogelsang, Timothy J, 1992. "Nonstationarity and Level Shifts with an Application to Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 301-20, July.
- Marmol, Francesc, 1998. "Spurious regression theory with nonstationary fractionally integrated processes," Journal of Econometrics, Elsevier, vol. 84(2), pages 233-250, June.
- Noriega, Antonio E. & de Alba, Enrique, 2001. "Stationarity and structural breaks -- evidence from classical and Bayesian approaches," Economic Modelling, Elsevier, vol. 18(4), pages 503-524, December.
- Phillips, P.C.B., 1986.
"Understanding spurious regressions in econometrics,"
Journal of Econometrics,
Elsevier, vol. 33(3), pages 311-340, December.
- Peter C.B. Phillips, 1985. "Understanding Spurious Regressions in Econometrics," Cowles Foundation Discussion Papers 757, Cowles Foundation for Research in Economics, Yale University.
- Wu, Jyh-Lin, 2000. "Mean reversion of the current account: evidence from the panel data unit-root test," Economics Letters, Elsevier, vol. 66(2), pages 215-222, February.
- Park, Joon Y. & Phillips, Peter C.B., 1989.
"Statistical Inference in Regressions with Integrated Processes: Part 2,"
Cambridge University Press, vol. 5(01), pages 95-131, April.
- Peter C.B. Phillips & Joon Y. Park, 1986. "Statistical Inference in Regressions with Integrated Processes: Part 2," Cowles Foundation Discussion Papers 819R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1987.
- D'Adda, Carlo & Scorcu, Antonello E., 2003.
"On the time stability of the output-capital ratio,"
Elsevier, vol. 20(6), pages 1175-1189, December.
- Nielsen, Heino Bohn, 2002. " An I(2) Cointegration Analysis of Price and Quantity Formation in Danish Manufactured Exports," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(5), pages 449-72, December.
- 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 525-36, August.
- 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.
- Niels Haldrup, 1998. "An Econometric Analysis of I(2) Variables," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 595-650, December.
- 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.
- Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
- Perron, Pierre & Zhu, Xiaokang, 2005. "Structural breaks with deterministic and stochastic trends," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 65-119.
When requesting a correction, please mention this item's handle: RePEc:sce:scecfa:151. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.