Spurious Regression-An Example

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# Spurious Regression-An Example - PowerPoint PPT Presentation

Spurious Regression-An Example. Data Generation Process. new; format /m1 /rd 9,3; apha=3; beta=1; T=100; Y=zeros(T,1); X=zeros(T,1); e1=Rndn(T,1); e2=Rndn(T,1); @ Data Generation Process @ Y[1,1]=0; X[1,1]=0; i=2; do until i&gt;T; Y[i,1]=apha+beta*Y[i-1,1]+4*e1[i,1];

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Presentation Transcript

### Spurious Regression-An Example

Data Generation Process
• new;
• format /m1 /rd 9,3;
• apha=3; beta=1;
• T=100;
• Y=zeros(T,1);
• X=zeros(T,1);
• e1=Rndn(T,1);
• e2=Rndn(T,1);
• @ Data Generation Process @
• Y[1,1]=0; X[1,1]=0;
• i=2;
• do until i>T;
• Y[i,1]=apha+beta*Y[i-1,1]+4*e1[i,1];
• X[i,1]=apha+beta*X[i-1,1]+2*e2[i,1];
i=i+1;
• endo;
• Output file=d:\Enclass\Spus\level.out reset;
• Y~X;
• Output off;
• Output file=d:\Enclass\Spus\Diff.out reset;
• (Y[2:100,1]-Y[1:99,1])~(X[2:100,1]-X[1:99,1]);
• Output off;