1995•Applied Economics LettersRequires access

Exponential smoothing and spurious correlation: a note

Keith Blackburn, Felipe Orduña-Bustamante, Martín Solà

Abstract

Exponential smoothing can introduce spurious auto-correlation in detrended data. The extent of this depends on the length of lag, the value of the smoothing parameter and the nature of the input process. The most widely-used version of exponential smoothing is the Hodrick-Prescott low-frequency filter.

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Key concepts: Spurious relationship, Smoothing, Exponential smoothing, Hodrick–Prescott filter, Exponential function, Correlation, Econometrics, Mathematics