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Furthermore, the Dickey\u2013Fuller tests of the unit root hypothesis applied to the estimated \u201cidiosyncratic terms\u201d often reject, creating an impression that a few factors are responsible for most of the nonstationarity in the data. We warn empirical researchers of these peculiar effects and suggest to always compare the analysis in levels with that in differences.<\/jats:p>","DOI":"10.3982\/ecta16703","type":"journal-article","created":{"date-parts":[[2021,3,15]],"date-time":"2021-03-15T09:42:01Z","timestamp":1615801321000},"page":"591-614","source":"Crossref","is-referenced-by-count":29,"title":["Spurious Factor Analysis"],"prefix":"10.3982","volume":"89","author":[{"given":"Alexei","family":"Onatski","sequence":"first","affiliation":[{"name":"Faculty of Economics, University of Cambridge"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Chen","family":"Wang","sequence":"additional","affiliation":[{"name":"Department of Statistics and Actuarial Science, University of Hong Kong"}],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"2359","published-online":{"date-parts":[[2021]]},"reference":[{"key":"ecta200217-bib-0001","doi-asserted-by":"crossref","first-page":"137","DOI":"10.1016\/j.jeconom.2003.10.022","volume":"122","author":"Bai","year":"2004","journal-title":"Journal of Econometrics"},{"key":"ecta200217-bib-0002","doi-asserted-by":"crossref","first-page":"1127","DOI":"10.1111\/j.1468-0262.2004.00528.x","volume":"72","author":"Bai","year":"2004","journal-title":"Econometrica"},{"key":"ecta200217-bib-0003","doi-asserted-by":"crossref","first-page":"1069","DOI":"10.1002\/jae.2570","volume":"32","author":"Banerjee","year":"2017","journal-title":"Journal of Applied Econometrics"},{"key":"ecta200217-bib-0004","doi-asserted-by":"crossref","unstructured":"Barigozzi, M., M. 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