R help - Apr 2007 - Regression on two time series

Dear all R user,
  
 Please forgive me if my question is too simple.
  
 My question is related to Statistics rather directly to R. Suppose I have two
time series of spot prices of two commodities X and Y for two years. Now I want
to see what percentage of spot price of X is explained by Y. Yes I can fit a
regression equation of X on Y. But my question is, is it legitimate? Because
both series are non-stationary with very high auto-correlation of order 1. And
regression analysis is basically designed for cross-sectional data, not for time
series data.
  
 Your help will be highly appreciable.
  
 Thanks and regards,
 Ron


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Ron,

you're right. It's not legitimate at all. I suggest you
to take a look at the HUGE bibliography on cointegration,
as a start up.

Rogerio
> Dear all R user,
>   
>  Please forgive me if my question is too simple.
>   
>  My question is related to Statistics rather directly to R. Suppose I have
two time series of spot prices of two commodities X and Y for two years. Now I
want to see what percentage of spot price of X is explained by Y. Yes I can fit
a regression equation of X on Y. But my question is, is it legitimate? Because
both series are non-stationary with very high auto-correlation of order 1. And
regression analysis is basically designed for cross-sectional data, not for time
series data.
>   
>  Your help will be highly appreciable.
>   
>  Thanks and regards,
>  Ron