Frequency domain principal components estimation of fractionally cointegrated processes
AbstractIn this paper we study the zero frequency spectral properties of fractionally cointegrated long memory processes and introduce a new frequency domain principal components estimator of the cointegration space and the factor loading matrix for the long memory factors. We find that for fractionally differenced (fractionally) cointegrated processes the squared multiple coherence at the zero frequency is equal to one, the spectral density matrix at the zero frequency is singular, and the factor loading and cointegrating matrices can be obtained from the eigenvectors of the spectral matrix at the zero frequency, associated with the positive and zero roots, respectively. A Monte Carlo simulation reveals that the proposed principal components estimator has already good properties with relatively small sample sizes. JEL Classification: C22
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Date of creation: Mar 2004
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Other versions of this item:
- Claudio Morana, 2004. "Frequency domain principal components estimation of fractionally cointegrated processes," Applied Economics Letters, Taylor & Francis Journals, vol. 11(13), pages 837-842.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-04 (All new papers)
- NEP-ECM-2005-10-04 (Econometrics)
- NEP-ETS-2005-10-04 (Econometric Time Series)
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