Spurious Regressions in Financial Economics?

Wayne Ferson (), Sergei Sarkissian and Timothy Simin ()

No 9143, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Even though stock returns are not highly autocorrelated, there is a spurious regression bias in predictive regressions for stock returns related to the classic studies of Yule (1926) and Granger and Newbold (1974). Data mining for predictor variables interacts with spurious regression bias. The two effects reinforce each other, because more highly persistent series are more likely to be found significant in the search for predictor variables. Our simulations suggest that many of the regressions in the literature, based on individual predictor variables, may be spurious

JEL-codes: G10 G12 (search for similar items in EconPapers)
Date: 2002-09
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-fin and nep-rmg
Note: AP
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Citations: View citations in EconPapers (75)

Published as Ferson, Wayne, Timothy Simin, and Sergei Sarkissian. "Spurious regressions in Financial Economics?" Journal of Finance 58 (August 2003): 1393-1414.

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