"So-called 'spurious regression' relationships between random-walk (or strongly autoregressive) variables are generally accompanied by clear signs of severe autocorrelation in their residuals. A conscientious researcher would therefore not end an investigation with such a result, but would...

"We propose a Bayesian procedure for exploiting small, possibly long-lag linear predictability in the innovations of a finite order autoregression. We model the innovations as having a log-spectral density that is a continuous mean-zero Gaussian process of order 1/√T. This local embedding...