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A Test of the Long Memory Hypothesis Based on Self-Similarity

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Listed:
  • Davidson James

    () (Economics, University of Exeter, Exeter, Devon, UK)

  • Rambaccussing Dooruj

    (Economics, University of Dundee, Dundee, Scotland, UK)

Abstract

This paper develops a new test of true versus spurious long memory, based on log-periodogram estimation of the long memory parameter using skip-sampled data. A correction factor is derived to overcome the bias in this estimator due to aliasing. The procedure is designed to be used in the context of a conventional test of significance of the long memory parameter, and a composite test procedure is described that has the properties of known asymptotic size and consistency. The test is implemented using the bootstrap, with the distribution under the null hypothesis being approximated using a dependent-sample bootstrap technique to approximate short-run dependence following fractional differencing. The properties of the test are investigated in a set of Monte Carlo experiments. The procedure is illustrated by applications to exchange rate volatility and dividend growth series.

Suggested Citation

  • Davidson James & Rambaccussing Dooruj, 2015. "A Test of the Long Memory Hypothesis Based on Self-Similarity," Journal of Time Series Econometrics, De Gruyter, vol. 7(2), pages 115-141, July.
  • Handle: RePEc:bpj:jtsmet:v:7:y:2015:i:2:p:115-141:n:4
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    References listed on IDEAS

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    Cited by:

    1. Sibbertsen, Philipp & Leschinski, Christian & Busch, Marie, 2018. "A multivariate test against spurious long memory," Journal of Econometrics, Elsevier, vol. 203(1), pages 33-49.
    2. Dooruj Rambaccussing & Murat Mazibas, 2020. "True versus Spurious Long Memory in Cryptocurrencies," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 13(9), pages 1-11, August.

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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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