In applied econometrics researchers often infer the relation among nonstationary time series by regression of their differences. The aim of this paper is to show that in some circumstances regression of differenced time series tends to reject the relation among their levels. This phenomenon is...

This paper seeks to model the adjustment process in the stock market by a continuous time state space model focusing on input-out relations. The value of the Samp;P 500 is generated as the output of the model with earnings and the interest rate as input. The model is found to fit the data well,...