Spurious Regression

Filippo Bonanno commented> When you regress two non-stationary variables and

there is a non-sense statistical relationship (like rain fall and income per capita in

some regions). For example if the explanatory power of the regression R-Sq is

exceptionally high, this may mean that you regressed non stationary-varianles.

Stratos D. Tserkezos commented> We have to go to Yule's (1927) paper and look

at one great example there.... nonsense correlations that are presented as

significant cause they are based on contemporaneous movements of

non-stationary series.... we can also see this with a Monte Carlo simulation of two

non-stationary series (yt= yt-1 +et and xt= xt-1 +ut) for a number of replications

and see the actual problem when we estimate y = a + bx

Idoko Gambit Itodo commented> Very high R square, low D-W stats, significant

parameters in a regression of variables that, theoretically, should not be correlated.

Takwana Chaminama commented> Nonsense regression - if R squared is high

than DW Stats there is a good reason to suspect that there is spurious regression

George Udny Yule (1927)

Tella Oluwatoba Ibrahim commented>A simple rule of model states that if a

researcher is faced with a complex and simple model, one has to go for the simple

model provided it can yield same valid result as the complex model.

Ade Kutu

Afolabi Luqman

Abdullah Sonnet

Asad Zaman

Atiq Rehman

Burcu Özcan

Ghumro Niaz Hussain

Muhammad Anees

Mohammad Zhafran

Muzammil Bhatti

Monis Syed

Mine PD

Moulana N. Cholovik

Muili Adebayo Hamid

Nicat Gasim

Najid Iqbal

Nasiru Inuwa

Noman Arshed

Rapelanoro Nady

Seye Olasehinde-Williams

Suborno Aditya

Sayed Hossain

Shishir Sakya

Sheikh Muzammil Naseer

Tella Oluwatoba Ibrahim

Younes Azzouz

Hossain Academy Note

Univariate Models |

Multivariate Models |

Panel Data Model |