Message

On Tuesday October 24th between 7am and 9am, we will carry out scheduled maintenance of the network. During this period of time, there may be potential outages, and the repository may be unavailable.

Thank you for your attention. We apologise for any inconvenience caused.

A note on spurious significance in regressions involving I(0) and I(1) variables

Stewart, Chris (2011) A note on spurious significance in regressions involving I(0) and I(1) variables. Empirical Economics, 41(3), pp. 565-571. ISSN (print) 0377-7332

Full text not available from this archive.

Abstract

We demonstrate that t ratios (the F statistic) for I(1) regressors in a model with an I(0) dependent variable will generally be oversized. This indicates that spurious significance occurs in a situation where it was not previously identified. We also compare the asymptotic rejection rates of t ratios for various combinations of I(1) and I(0) variables in the two-variable linear regression model. These rejection rates systematically increase with the degree of autocorrelation, yielding spurious significance, when both variables are either positively or negatively autocorrelated. In contrast, when one variable is negatively autocorrelated and the other is positively autocorrelated the rejection rates systematically fall and are undersized.

Item Type: Article
Research Area: Economics and econometrics
Faculty, School or Research Centre: Faculty of Arts and Social Sciences > School of Economics (until November 2012)
Depositing User: Chris Stewart
Date Deposited: 30 Apr 2013 11:24
Last Modified: 29 Nov 2013 12:28
URI: http://eprints.kingston.ac.uk/id/eprint/25460

Actions (Repository Editors)

Item Control Page Item Control Page