Anderson 2 testing for unit roots w trends if a

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Unformatted text preview: ’t be right Economics 20 - Prof. Anderson 2 Testing for Unit Roots w/ Trends If a series is clearly trending, then we need to adjust for that or might mistake a trend stationary series for one with a unit root Can just add a trend to the model Still looking at the t-statistic for θ , but the critical values for the Dickey-Fuller test change Economics 20 - Prof. Anderson 3 Spurious Regression Consider running a simple regression of yt on xt where yt and xt are independent I(1) series The usual OLS t-statistic will often be statistically significant, indicating a relationship where there is none Called the spurious regr...
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This note was uploaded on 03/03/2009 for the course ECON 382 taught by Professor Sun during the Spring '08 term at CUNY Queens.

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