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Aggregation and long-memory: An analysis based on the discrete Fourier transform

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  • Shi, Wendong
  • Sun, Jingwei

Abstract

Datasets constructed via temporal aggregation or skip sampling are widely used by empirical studies in economics and finance, which leads to substantive discussion and debates on the effects of temporal aggregation and choice of sampling frequency. This paper studies a key feature of data aggregation by deriving the representation of the discrete Fourier transform (dft) of the aggregated series considering the aliasing effect. Analyses are not limited to the spectrum of the stationary series under aggregation, but extended to the periodogram of the non-stationary series. We further apply our results of the dft to a particular example of fractional processes under aggregation. We show that the estimates of the long-memory parameter are the same for the temporally aggregated series and the original one if the same bandwidths are used, regardless of the stationarity of the series. The theoretical findings are empirically verified by the analysis of S&P 500 volatility from 1928 to 2011.

Suggested Citation

  • Shi, Wendong & Sun, Jingwei, 2016. "Aggregation and long-memory: An analysis based on the discrete Fourier transform," Economic Modelling, Elsevier, vol. 53(C), pages 470-476.
    • Handle: RePEc:eee:ecmode:v:53:y:2016:i:c:p:470-476
    DOI: 10.1016/j.econmod.2015.10.045
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    More about this item

    Keywords

    Temporal aggregation; Skip sampling; Discrete Fourier transform (dft); Periodogram;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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