In this paper, we show that spurious cointegration can occur when there are breaks in the variances of the innovation errors of time series, especially when the breaks occur early in the sample period. An empirical example is provided to demonstrate the case.

In this article, we study the impact of an abrupt change in variance on the Breusch-Godfrey's LM test for autocorrelation. It is demonstrated by Monte Carlo simulations that a break in variance can generate spurious rejections of the null hypothesis of no serial correlation. Hence, a researcher...

This study considers the possibility of estimating a Dickey-Fuller regression, constraining the autoregressive parameter to be at most one, and imposing prior knowledge of the sign of the drift parameter. In spite of apparently encouraging asymptotic results, it emerges that no feasible test of...