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Detrend

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Detrend
To remove the general drift, tendency, or bent of a set of statistical data as related to time. Often accomplished by regressing a variable or a time index and perhaps the square of the time index and capturing the residuals. A stochastic detrend would be to subtract a moving-average (say for five years) from the value of the variable.

Detrend
The removal of a trend from the consideration of several variables. A detrend may be necessary to discover a company's true financial health. For example, one may detrend increased sales around Christmas time to see a more accurate account of a company's sales in a given year.


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We do not employ smoothing models to detrend the data, as we feel that the imposed trend reversions may erroneously be interpreted as structure (see Nelson and Plosser (1982)).
Thus, we detrend variables IW and GNP, PCGNP, SME, TCONC and run the regression on the detrended IW and other independent variables.
 
 
 
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