A spurious regression occurs when a pair of independent series, but with strong temporal properties, are found apparently to be related according to standard inference in an OLS regression. Although this is well known to occur with pairs of independent unit root processes, this paper finds...

A spurious regression occurs when a pair of independent series, but with strong temporal properties, are found apparently to be related according to standard inference in an OLS regression. Although this is well known to occur with pairs of independent unit root processes, this paper finds...

The long memory characteristic of financial market volatility is well documented and has important implications for volatility forecasting and option pricing. When fitted to the same data, different volatility models calculate the unconditional variance differently and could have very different...

This paper analyzes the effects of individual-specific size factors in a dynamic panel regression model. Theory and simulation show that an individual-specific size factor, with a fat-tailed distribution or a time-varying property, may cause spurious stochastics. If a pair of panel variables...

Models that may appear to have different properties may in fact produce residuals that differ only in subtle ways. By analysing the relationships between model residuals the problems in distinguishing between models can perhaps be discovered, as illustrated by the econometric examples...

This paper establishes practical criteria for selecting amongst hypothetical data generating processes in cases where the series has long memory and exponential distribution which implies that the innovations have extremely fat tails.

Stock & Watson (1999) consider the relative quality of different univariate forecasting techniques. This paper extends their study on forecasting practice, comparing the forecasting performance of two popular model selection procedures, the Akaike information criterion (AIC) and the Bayesian...