Spurious Regressions in Financial Economics.pdfVIP

Spurious Regressions in Financial Economics? Wayne E. Ferson University of Washington and NBER Sergei Sarkissian McGill University Timothy Simin University of Washington first draft: February 14, 1998 this revision: August 4, 1999 ABSTRACT We study biases associated with regression models in which persistent lagged variables predict stock returns, either linearly or in interaction with contemporaneous values of a market index return. We focus on the issue of spurious regression, related to the classic