Even though stock returns are not highly autocorrelated, there is a spurious regression bias in predictive regressions for stock returns related to the classic studies of Yule (1926) and Granger and Newbold (1974). Data mining for predictor variables interacts with spurious regression bias. The...

Even though stock returns are not highly autocorrelated, there is a spurious regression bias in predictive regressions for stock returns related to the classic studies of <link rid="b49">Yule (1926)</link> and <link rid="b21">Granger and Newbold (1974)</link>. Data mining for predictor variables interacts with spurious regression bias. The...

This paper studies the estimation of asset pricing model regressions with conditional alphas and betas, focusing on the joint effects of data snooping and spurious regression. We find that the regressions are reasonably well specified for conditional betas, even in settings where simple...

Two problems, spurious regression bias and naive data mining, conspire to mislead analysts about predictive models for stock returns. This article demonstrates the two problems, how they interact, and makes suggestions for what to do about it