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Multivariate Fractional Components Analysis

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  • Tobias Hartl
  • Roland Weigand

Abstract

We propose a setup for fractionally cointegrated time series which is formulated in terms of latent integrated and short-memory components. It accommodates nonstationary processes with different fractional orders and cointegration of different strengths and is applicable in high-dimensional settings. In an application to realized covariance matrices, we find that orthogonal short- and long-memory components provide a reasonable fit and competitive out-of-sample performance compared to several competing methods.

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  • Tobias Hartl & Roland Weigand, 2018. "Multivariate Fractional Components Analysis," Papers 1812.09149, arXiv.org, revised Jan 2019.
    • Handle: RePEc:arx:papers:1812.09149
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    1. Tobias Hartl & Roland Jucknewitz, 2022. "Approximate state space modelling of unobserved fractional components," Econometric Reviews, Taylor & Francis Journals, vol. 41(1), pages 75-98, January.
    2. Ergemen, Yunus Emre, 2023. "Parametric estimation of long memory in factor models," Journal of Econometrics, Elsevier, vol. 235(2), pages 1483-1499.
    3. Tobias Hartl, 2020. "Macroeconomic Forecasting with Fractional Factor Models," Papers 2005.04897, arXiv.org.

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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