A month ago Mike Kimel had a post on Angry Bear dealing with the relationship between the S&P 500 market index and nominal GDP. His naive regression showed correlation of ~94%. One should not forget that Clive Granger introduced the idea of spurious regression 30 years ago. (A surrogate Nobel Prize for this finding in 2003.) This correlation is a good example; both variables are nonstationary, I(1), and are not cointegrated. Hence, the above correlation is spurious.
Actually, the S&P 500 returns are coitegrated with the change rate of real GDP per capita and this correlation is not spurious as shown in this blog and our paper on S&P 500.
Actually, the S&P 500 returns are coitegrated with the change rate of real GDP per capita and this correlation is not spurious as shown in this blog and our paper on S&P 500.
No comments:
Post a Comment