Publication Type
Journal Article
Version
publishedVersion
Publication Date
11-1998
Abstract
Some new tools for analyzing spurious regressions are presented. The theory utilizes the general representation of a stochastic process in tenns of an orthononnal system and provides an extension of tile Weierstrass theorem to include the approximation of continuous functions and stochastic processes by Wiener processes. The theory is applied to two classic examples of spurious regressions: regression of stochastic trends on time polynomials, and regressions among independent random walks. It is shown that such regressions reproduce in part and in whole the underlying orthonormal representations.
Keywords
Loeve Karhunen representation, nonsense correlation, orthonormal systems. spurious regression, Weierstrass theorem
Discipline
Econometrics
Research Areas
Econometrics
Publication
Econometrica
Volume
66
Issue
6
First Page
1299
Last Page
1325
ISSN
0012-9682
Identifier
10.2307/2999618
Publisher
Econometric Society
Citation
PHILLIPS, Peter C. B..
New tools for understanding spurious regressions. (1998). Econometrica. 66, (6), 1299-1325.
Available at: https://ink.library.smu.edu.sg/soe_research/2812
Copyright Owner and License
Publisher
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2307/2999618