Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103623
Authors: 
Ventosa-Santaulària, Daniel
Rodríguez-Caballero, Carlos Vladimir
Year of Publication: 
2013
Citation: 
[Journal:] Econometrics [ISSN:] 2225-1146 [Publisher:] MDPI [Place:] Basel [Volume:] 1 [Year:] 2013 [Issue:] 3 [Pages:] 236-248
Abstract: 
Polynomial specifications are widely used, not only in applied economics, but also in epidemiology, physics, political analysis and psychology, just to mention a few examples. In many cases, the data employed to estimate such specifications are time series that may exhibit stochastic nonstationary behavior. We extend Phillips' results (Phillips, P. Understanding spurious regressions in econometrics. J. Econom. 1986, 33, 311-340.) by proving that an inference drawn from polynomial specifications, under stochastic nonstationarity, is misleading unless the variables cointegrate. We use a generalized polynomial specification as a vehicle to study its asymptotic and finite-sample properties. Our results, therefore, lead to a call to be cautious whenever practitioners estimate polynomial regressions.
Subjects: 
polynomial regression
misleading inference
integrated processes
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article
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