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Pitfalls in Cross-Section Studies with integrated Regressors:  Survey and New Developments
Athens University of Economics and Business, Greece; European University Institute, Italy.ORCID iD: 0000-0002-9376-8726
Linköping University, Department of Management and Engineering, Economics. Linköping University, Faculty of Arts and Sciences.ORCID iD: 0000-0002-8145-1000
McDonough School of Business, Georgetown University, USA.
2018 (English)In: Journal of economic surveys (Print), ISSN 0950-0804, E-ISSN 1467-6419, Vol. 32, no 4, p. 1045-1073Article in journal (Refereed) Published
Abstract [en]

In cross-section studies, if the dependent variable is I(0) but the regressor is I(1), the true slope must be zero in the resulting "unbalanced regression." A spuriously significant relationship may be found in large cross sections, however, if the integrated regressor is related to a stationary variable that enters the DGP but is omitted from the regression. The solution is to search for the related stationary variable, in some cases the first difference of the integrated regressor, in other cases a categorical variable that can take on limited number of values which depend on the integrated variable. We present an extensive survey, new developments and applications in finance.

Place, publisher, year, edition, pages
Wiley-Blackwell, 2018. Vol. 32, no 4, p. 1045-1073
Keywords [en]
Categorical variables; Stock appreciation; Survey; Unbalanced regressions; Unit roots
National Category
Economics
Research subject
Economic Information Systems
Identifiers
URN: urn:nbn:se:liu:diva-145627DOI: 10.1111/joes.12246ISI: 000441246800004OAI: oai:DiVA.org:liu-145627DiVA, id: diva2:1189060
Available from: 2018-03-09 Created: 2018-03-09 Last updated: 2018-08-24

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The full text will be freely available from 2020-03-08 00:33
Available from 2020-03-08 00:33

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Sjö, Bo

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CiteExportLink to record
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  • apa
  • harvard1
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  • vancouver
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  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf