"Radford Neal" <[EMAIL PROTECTED]> a écrit dans le message news: > >If the explanatory variable is generated by an integrated process, it won't > >work, even if the error term is an iid process. > > This is what I am disputing. What basis do you have for claiming that > it won't work? And in what sense do you mean that "it won't work"? > > I suspect that you've encountered a claim that is somewhat like this > in some reference book, and have mis-interpreted it. > > Radford Neal >
Well, I may have not explained myself very clearly, or understood what you really meant, in which case I apologize in advance. Now, here is what I mean when I say that standard procedures shouldn't work with integrated processes. If X is non stationary, and if the regression equation is true, Y is non stationary too. The OLS slope estimator is (X'X)(-1) X'Y If the X is generated by an integrated process, (X'X) will not be convergent in probability, nor will X'Y. In the case of Y and X being two independent random walks, the mean of (XX)(-1)X'Y can be calculated using Wiener distribution theory however, and it is not zero (it looks very bad). The t-stat for slope is not zero either. The variance of both slope estimator and t-stats are much higher than standard theory forecast, and, what is even worse, do not decrease as sample size increase. David B ================================================================= Instructions for joining and leaving this list and remarks about the problem of INAPPROPRIATE MESSAGES are available at http://jse.stat.ncsu.edu/ =================================================================