Spurious regression and lurking variables

Lizeth García-Belmonte and Daniel Ventosa-Santaulària

Statistics & Probability Letters, 2011, vol. 81, issue 12, 2004-2010

Abstract: We present asymptotic and finite-sample arguments to study the spurious regression problem. This problem may be solved by introducing a lurking variable in the specification even if it is merely a proxy variable. Moreover, this approach is also valid if the lurking variable is a trending mechanism, as when the spurious regression is due to nonstationarities in the variables.

Keywords: Spurious regression; Lurking variable; Trending mechanism (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1016/j.spl.2011.08.015

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