Polynomial Regressions and Nonsense Inference

Daniel Ventosa-Santaulària and Carlos Vladimir Rodríguez-Caballero
Additional contact information
Carlos Vladimir Rodríguez-Caballero: Center for Research in Econometric Analysis of Time Series (CREATES) and Department of Economics and Business, Aarhus University, Fuglesangs Allé 4, Building 2622 (203), Aarhus V 8210, Denmark
Authors registered in the RePEc Author Service: Carlos Vladimir Rodríguez Caballero

Econometrics, 2013, vol. 1, issue 3, 1-13

Abstract: Polynomial specifications are widely used, not only in applied economics, but also in epidemiology, physics, political analysis and psychology, just to mention a few examples. In many cases, the data employed to estimate such specifications are time series that may exhibit stochastic nonstationary behavior. We extend Phillips’ results (Phillips, P. Understanding spurious regressions in econometrics. J. Econom. 1986, 33, 311–340.) by proving that an inference drawn from polynomial specifications, under stochastic nonstationarity, is misleading unless the variables cointegrate. We use a generalized polynomial specification as a vehicle to study its asymptotic and finite-sample properties. Our results, therefore, lead to a call to be cautious whenever practitioners estimate polynomial regressions.

Keywords: polynomial regression; misleading inference; integrated processes (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.mdpi.com/2225-1146/1/3/236/pdf (application/pdf)
https://www.mdpi.com/2225-1146/1/3/236/ (text/html)

Related works:
Working Paper: Polynomial Regressions and Nonsense Inference (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:1:y:2013:i:3:p:236-248:d:30523

Access Statistics for this article

Econometrics is currently edited by Ms. Djurdjija Mastalo

More articles in Econometrics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().