Graduate Using standard deviation values as independent variables

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Using standard deviation values as independent variables in linear regression analysis (OLS) is feasible, but caution is necessary regarding overlapping time periods. Overlapping can result in autocorrelation and misleading t-values, which may compromise the validity of the results. To mitigate these issues, employing robust methods such as Generalized Method of Moments (GMM) is recommended. Properly calculating standard deviation values from time series data is crucial for accurate predictions. Overall, careful consideration of data structure and analysis methods is essential for reliable outcomes.
monsmatglad
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Hey. I am planning on doing some research, where I predict a change based on different types of risk.
The question is simple. Can I use values of standard deviation as independent variables in a linear regression analysis (OLS)? The standard deviation values over time will be calculated in advance from time series, and then used as independent variables in the regression analysis.

Mons
 
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You have to be careful of overlapping time periods, ie the rh var is sd from period t:t+n and lh variable is data at time t, with each increment of t having n overlap - this will lead to autocorrelation and spurious t-values unless you use a robust method like GMM to correct for these
 

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