New bootstrap inference for spurious regression problems

Hrishikesh Vinod

Journal of Applied Statistics, 2016, vol. 43, issue 2, 317-335

Abstract: Phillips [11] provides asymptotic theory for regressions that relate nonstationary time series including those integrated of order 1, . A practical implication of the literature on spurious regression is that one cannot trust the usual confidence intervals (CIs). In the absence of prior knowledge that two series are cointegrated, it is therefore recommended that we abandon the specification in levels and work with differenced or detrended series. For situations when the specification in levels is sacrosanct we propose new CIs based on the Maximum Entropy bootstrap explained in Vinod and López-de-Lacalle ( Maximum entropy bootstrap for time series: The meboot R package , J. Statist. Softw. 29 (2009), pp. 1--19). An extensive Monte Carlo simulation shows that our proposal can provide more reliable conservative CIs than traditional and block bootstrap intervals.

Date: 2016
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/02664763.2015.1049939

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