Nonsense Correlations, Random Shocks and Induced Cycles: Yule, Slutzky and Working

5.1 By the mid-1920s the methodological advances discussed in the previous two chapters, namely periodogram analysis and the variate differencing method, appeared to be running out of steam, with few new applications appearing and increasing concern about the underlying assumptions of the techniques. At this point, three papers appeared in quick succession which transformed the subject and laid the foundations for modern approaches to the analysis of time series. Two of the papers, by Yule (1926) and Slutzky (1927), went a long way to establishing the basis for the theoretical analysis of stationary time series and, because of the enduring importance of their contributions, are consequently subjected to detailed scrutiny in this chapter, along with a subsequent and closely related paper by Working (1934). The third paper, also by Yule (Yule, 1927), attacked periodic time series in a new way and, in turn, provided the foundations for analysing oscillatory time series: this is our focus in Chapter 6.