Spurious Regression and Trending Variables*

Antonio Noriega () and Daniel Ventosa‐Santaulària
Authors registered in the RePEc Author Service: Daniel Ventosa-Santaulària

Oxford Bulletin of Economics and Statistics, 2007, vol. 69, issue 3, 439-444

Abstract: This paper analyses the asymptotic and finite‐sample implications of different types of non‐stationary behaviour among the dependent and explanatory variables in a linear spurious regression model. We study cases when the non‐stationarity 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 both dependent and explanatory variables behave in a non‐stationary way. Simulation experiments confirm our asymptotic results.

Date: 2007
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Citations: View citations in EconPapers (17)

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https://doi.org/10.1111/j.1468-0084.2007.00481.x

Related works:
Working Paper: Spurious Regression and Trending Variables (2007)
Working Paper: Spurious Regression and Trending Variables (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:obuest:v:69:y:2007:i:3:p:439-444

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