Nonsense regressions due to time-varying means

Uwe Hassler

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: Regressions of two independent time senes are considered. The variables are covariance stationary but display time-varying although not trending means. Two prominent examples are mean shifts due to structural breaks and seasonally varying means. If the variation of the means is not taken into account, this induces nonsense correlation. The asymptotic treatment is supplemented by experimental evidence.

Keywords: Structural; breaks; deterministic; seasonality; spurious; correlation (search for similar items in EconPapers)
Date: 1999-10
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wsrepe:6361

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