When a pair of independent series is highly persistent, there is a spurious regression bias in a regression between these series, closely related to the classic studies of Granger and Newbold (1974). Although this is well known to occur with independent I(1) processes, this paper provides theoretical and numerical evidence that the phenomenon of spurious regression also arises in regressions between stationary AR(p) processes with structural breaks, which occur at different points in time, in the means and the trends. The intuition behind this is that structural breaks can increase the persistence levels in the processes (e.g., Granger and Hyung (2004)), which then leads to spurious regressions. These phenomena occur for general distributions and serial dependence of the innovation terms. Copyright

Additional Metadata
Keywords spurious regression, stationary processes, strictly stationary, structural breaks, temporal dependence
Journal Studies in Nonlinear Dynamics & Econometrics
Citation
Chu, B, & Kozhan, R. (Roman). (2011). Spurious regressions of stationary AR(p) processes with structural breaks. Studies in Nonlinear Dynamics & Econometrics, 15(1).