Phd Chapter - Cointegration
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Before the introduction of cointegration tests, economists relied on linear regressions to find the relationship between several time series processes. However, Granger and Newbold argued that linear regression was an incorrect approach for analyzing time series due to the possibility of producing spurious correlations. A spurious correlation occurs when two or more associated variables are deemed causally related due to either a coincidence or an unknown third factor. A possible result is a misleading statistical relationship between several time series variables.
Here is my favorite explanation from Ben Lambert
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