01634cam a22002297 4500001000600000003000500006005001700011008004100028100002300069245013200092260006600224490005100290500001900341520069100360530006101051538007201112538003601184700001901220710004201239830008601281856003701367t0030NBER20140420095402.0140420s1983 mau||||fs|||| 000 0 eng d1 aNelson, Charles R.10aPitfalls in the use of Time as an Explanatory Variable in Regressionh[electronic resource] /cCharles R. Nelson, Heejoon Kang. aCambridge, Mass.bNational Bureau of Economic Researchc1983.1 aNBER technical working paper seriesvno. t0030 aNovember 1983.3 aRegression of a trendless random walk on time produces R-squared values around .44 regardless of sample length. The residuals from the regression exhibit only about 14 percent as much variation as the original series even though the underlying process has no functional dependence on time. The autocorrelation structure of these "detrended" random walks is pseudo-cyclical and purely artifactual. Conventional tests for trend are strongly biased towards finding a trend when none is present, and this effect is only partially mitigated by Cochrane-Orcutt correction for autocorrelation. The results are extended to show that pairs of detrended random walks exhibit spurious correlation. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.1 aKang, Heejoon.2 aNational Bureau of Economic Research. 0aTechnical Working Paper Series (National Bureau of Economic Research)vno. t0030.4 uhttp://www.nber.org/papers/t0030