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Bootstrap Testing for Fractional Integration

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Author Info

  • Andersson, Michael K.

    (Dept. of Economic Statistics, Stockholm School of Economics)

  • Gredenhoff, Mikael P.

    (Dept. of Economic Statistics, Stockholm School of Economics)

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    Abstract

    Asymptotic tests for fractional integration, such as the Geweke-Porter-Hudak test, the modified rescaled range test and Lagrange multiplier type tests, exhibit size-distortions in small-samples. This paper investigates a parametric bootstrap testing procedure, for size-correction, by means of a computer simulation study. The bootstrap provides a practical method to eliminate size-distortions in the case of an asymptotic pivotal statistic while the power, in general,is close to the corresponding size-adjusted asymptotic test. The results are very encouraging and suggest that a bootstrap testing procedure does correct for size-distortions.

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    Bibliographic Info

    Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 188.

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    Length: 12 pages
    Date of creation: 29 Aug 1997
    Date of revision:
    Handle: RePEc:hhs:hastef:0188

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    Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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    Related research

    Keywords: Long-memory; ARFIMA; parametric resampling; small-sample; MonteCarlo simulation; size-correction;

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    References

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    1. repec:wop:humbsf:1995-63 is not listed on IDEAS
    2. Andrew W. Lo, 1989. "Long-term Memory in Stock Market Prices," NBER Working Papers 2984, National Bureau of Economic Research, Inc.
    3. J. L. Horowitz, 1995. "Bootstrap Methods In Econometrics: Theory And Numerical Performance," SFB 373 Discussion Papers 1995,63, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    4. Francis X. Diebold & Glenn D. Rudebusch, 1990. "On the power of Dickey-Fuller tests against fractional alternatives," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 119, Board of Governors of the Federal Reserve System (U.S.).
    5. Donald W.K. Andrews, 1988. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 877R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1989.
    6. Joel L. Horowitz, 1996. "Bootstrap Methods in Econometrics: Theory and Numerical Performance," Econometrics, EconWPA 9602009, EconWPA, revised 05 Mar 1996.
    7. Horowitz, J.L., 1995. "Bootstrap Methods in Econometrics: Theory and Numerical Performance," Working Papers, University of Iowa, Department of Economics 95-10, University of Iowa, Department of Economics.
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    Citations

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    Cited by:
    1. Pilar Grau-Carles, 2005. "Tests of Long Memory: A Bootstrap Approach," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 25(1), pages 103-113, February.
    2. Arteche, J. & Orbe, J., 2005. "Bootstrapping the log-periodogram regression," Economics Letters, Elsevier, Elsevier, vol. 86(1), pages 79-85, January.
    3. Pilar Grau-Carles, 2004. "Test for long memory processes. A bootstrap approach," Computing in Economics and Finance 2004, Society for Computational Economics 111, Society for Computational Economics.

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