Departamento de Economia y Finanzas, Universidad de Guanajuato, DCEA-Campus Marfil Fracc. I, 36250 El Establo, Guanajuato, Gto, Mexico
Copyright © 2009 D. Ventosa-Santaulària. This is an open access article distributed under the
Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
The spurious regression phenomenon in least squares occurs for a wide range
of data generating processes, such as driftless unit roots, unit roots with drift,
long memory, trend and broken-trend stationarity. Indeed, spurious regressions
have played a fundamental role in the building of modern time series econometrics
and have revolutionized many of the procedures used in applied macroeconomics. Spin-offs from this research range from unit-root tests to cointegration and error-correction models. This paper provides an overview of results about spurious
regression, pulled from disperse sources, and explains their implications.