Published in

MDPI, Journal of Risk and Financial Management, 8(14), p. 366, 2021

DOI: 10.3390/jrfm14080366

Links

Tools

Export citation

Search in Google Scholar

Spurious Relationships for Nearly Non-Stationary Series

Journal article published in 2021 by Yushan Cheng ORCID, Yongchang Hui, Wing-Keung Wong ORCID, Michael McAleer ORCID
This paper is made freely available by the publisher.
This paper is made freely available by the publisher.

Full text: Download

Green circle
Preprint: archiving allowed
Green circle
Postprint: archiving allowed
Green circle
Published version: archiving allowed
Data provided by SHERPA/RoMEO

Abstract

Literature shows that the regression of independent and (nearly) nonstationary time series could result in spurious outcomes. In this paper, we conjecture that under some situations, the regression of two independent and nearly non-stationary series does not have any spurious problem at all. To check whether our conjecture holds, we set up several situations and conduct simulations to justify our conjecture. Our simulations show that under some situations, the chance that the regressions being spurious is very high for all the cases simulated in our paper. Nonetheless, under some other situations, our simulation shows that the rejection rates are much smaller than the 5% level of significance for all the cases simulated in our paper, implying that our conjecture could hold under some situations that regression of two independent and nearly non-stationary series does not have any spurious problem at all.