Discussing the article: "Non-stationary processes and spurious regression"
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Check out the new article: Non-stationary processes and spurious regression.
The article demonstrates spurious regression occurring when attempting to apply regression analysis to non-stationary processes using Monte Carlo simulation.
In this article, I will use Monte Carlo simulation to show how spurious regression occurs when the stationarity assumption is violated, and also when the regression model is misspecified in the stationary case. For this I will use the standard MQL5 statistical library to generate random numbers and calculate critical values of the normal distribution and Student's distribution, as well as the Graphics library to plot the obtained results. Calculating the regression model is greatly simplified by using the matrix algebra methods.
Author: Evgeniy Chernish