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Small-b and Fixed-b Asymptotics for Weighted Covariance Estimation in Fractional Cointegration

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  • Javier Hualde
  • Fabrizio Iacone

Abstract

type="main" xml:id="jtsa12113-abs-0001"> In a standard cointegrating framework, Phillips (1991) introduced the weighted covariance (WC) estimator of cointegrating parameters. Later, Marinucci (2000) applied this estimator to fractional circumstances and, like Phillips (1991), analysed the so-called small-b asymptotic approximation to its sampling distribution. Recently, an alternative limiting theory (fixed-b asymptotics) has been successfully employed to approximate sampling distributions. With the purpose of comparing both approaches, we derive here the fixed-b limit of WC estimators in a fractional setting, filling also some gaps in the traditional (small-b) theory. We also provide some Monte Carlo evidence that suggests that the fixed-b limit is more accurate.

Suggested Citation

  • Javier Hualde & Fabrizio Iacone, 2015. "Small-b and Fixed-b Asymptotics for Weighted Covariance Estimation in Fractional Cointegration," Journal of Time Series Analysis, Wiley Blackwell, vol. 36(4), pages 528-540, July.
    • Handle: RePEc:bla:jtsera:v:36:y:2015:i:4:p:528-540
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    References listed on IDEAS

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    1. Jin, Sainan & Phillips, Peter C.B. & Sun, Yixiao, 2006. "A new approach to robust inference in cointegration," Economics Letters, Elsevier, vol. 91(2), pages 300-306, May.
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