We study the optimal choice of quasi-likelihoods for nearly integrated, possibly non-normal, autoregressive models. It turns out that the two most natural candidate criteria, minimum Mean Squared Error (MSE) and maximum power against the unit root null, give rise to different optimal quasi-likelihoods. In both cases, the functional specification of the optimal quasi-likelihood is the same: it is a combination of the true likelihood and the Gaussian quasi-likelihood. The optimal relative weights, however, depend on the criterion chosen and are markedly different. Throughout, we base our results on exact limiting distribution theory. We derive a new explicit expression for the joint density of the minimal sufficient functionals of Ornstein-Uhlenbeck processes, which also has applications in other fields, and we characterize its behaviour for extreme values of its arguments. Using these results, we derive the asymptotic power functions of statistics which converge weakly to combinations of these sufficient functionals. Finally, we evaluate numerically our computationally-efficient formulae.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Department of Economics, University of York in its series Discussion Papers with number
00/21.
Length: Date of creation: Date of revision: Handle: RePEc:yor:yorken:00/21
Contact details of provider: Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom Phone: (0)1904 433776 Fax: (0)1904 433759 Email: Web page: http://www.york.ac.uk/depts/econ/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Paul Hodgson).
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: