IDEAS home Printed from https://ideas.repec.org/a/eee/econom/v158y2010i1p37-50.html
   My bibliography  Save this article

Model-based asymptotic inference on the effect of infrequent large shocks on cointegrated variables

Author

Listed:
  • Georgiev, Iliyan

Abstract

Quasi-maximum-likelihood (QML) estimation of a model combining cointegration in the conditional mean and rare large shocks (outliers) with a factor structure in the innovations is studied. The goal is not only to robustify inference on the conditional-mean parameters, but also to find regularities and conduct inference on the instantaneous and long-run effect of the large shocks. Given the cointegration rank and the factor order, [chi]2 asymptotic inference is obtained for the cointegration vectors, the short-run parameters, and the direction of each column of both the factor loading matrix and the matrix of long-run impacts of the large shocks. Large shocks, whose location is assumed unknown a priori, can be detected and classified consistently into the factor components.

Suggested Citation

  • Georgiev, Iliyan, 2010. "Model-based asymptotic inference on the effect of infrequent large shocks on cointegrated variables," Journal of Econometrics, Elsevier, vol. 158(1), pages 37-50, September.
  • Handle: RePEc:eee:econom:v:158:y:2010:i:1:p:37-50
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304-4076(10)00047-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521471626.
    2. Kiefer, Nicholas M, 1978. "Discrete Parameter Variation: Efficient Estimation of a Switching Regression Model," Econometrica, Econometric Society, vol. 46(2), pages 427-434, March.
    3. Cavaliere, Giuseppe & Georgiev, Iliyan, 2009. "Robust Inference In Autoregressions With Multiple Outliers," Econometric Theory, Cambridge University Press, vol. 25(6), pages 1625-1661, December.
    4. Franses, Philip Hans & Lucas, Andre, 1998. "Outlier Detection in Cointegration Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 459-468, October.
    5. Georgiev, Iliyan, 2008. "Asymptotics For Cointegrated Processes With Infrequent Stochastic Level Shifts And Outliers," Econometric Theory, Cambridge University Press, vol. 24(3), pages 587-615, June.
    6. Stephen J. Leybourne And Paul Newbold, 2000. "Behaviour of the standard and symmetric Dickey-Fuller-type tests when there is a break under the null hypothesis," Econometrics Journal, Royal Economic Society, vol. 3(1), pages 1-15.
    7. Cavaliere, Giuseppe & Georgiev, Iliyan, 2007. "Testing For Unit Roots In Autoregressions With Multiple Level Shifts," Econometric Theory, Cambridge University Press, vol. 23(6), pages 1162-1215, December.
    8. Hong‐Tu Zhu & Heping Zhang, 2004. "Hypothesis testing in mixture regression models," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 66(1), pages 3-16, February.
    9. Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
    10. Leybourne, Stephen J. & Newbold, Paul, 2000. "BEHAVIOR OF DICKEY–FULLER t-TESTS WHEN THERE IS A BREAK UNDER THE ALTERNATIVE HYPOTHESIS," Econometric Theory, Cambridge University Press, vol. 16(5), pages 779-789, October.
    11. Iliyan Georgiev, 2007. "A mixture-distribution factor model for multivariate outliers," Econometrics Journal, Royal Economic Society, vol. 10(3), pages 605-636, November.
    12. Andre Lucas, 1998. "Inference on cointegrating ranks using lr and lm tests based on pseudo-likelihoods," Econometric Reviews, Taylor & Francis Journals, vol. 17(2), pages 185-214.
    13. Lucas, André, 1997. "Cointegration Testing Using Pseudolikelihood Ratio Tests," Econometric Theory, Cambridge University Press, vol. 13(2), pages 149-169, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boswijk, H. Peter & Lucas, André & Taylor, Nick, 1998. "A comparison of parametric, semi-nonparametric, adaptive and nonparametric tests," Serie Research Memoranda 0062, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    2. Bosco, Bruno & Parisio, Lucia & Pelagatti, Matteo & Baldi, Fabio, 2007. "A Robust Multivariate Long Run Analysis of European Electricity Prices," International Energy Markets Working Papers 7438, Fondazione Eni Enrico Mattei (FEEM).
    3. H. Peter Boswijk & Andre Lucas & Nick Taylor, 1999. "A Comparison of Parametric, Semi-nonparametric, Adaptive, and Nonparametric Cointegration Tests," Tinbergen Institute Discussion Papers 99-012/4, Tinbergen Institute.
    4. Bruno Bosco & Lucia Parisio & Matteo Pelagatti & Fabio Baldi, 2010. "Long-run relations in european electricity prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(5), pages 805-832.
    5. Carlomagno, Guillermo & Espasa, Antoni, 2014. "The pairwise approach to model a large set of disaggregates with common trends," DES - Working Papers. Statistics and Econometrics. WS ws141309, Universidad Carlos III de Madrid. Departamento de Estadística.
    6. Blazsek, Szabolcs & Escribano, Álvaro & Licht, Adrian, 2019. "Co-integration and common trends analysis with score-driven models : an application to the federal funds effective rate and US inflation rate," UC3M Working papers. Economics 28451, Universidad Carlos III de Madrid. Departamento de Economía.
    7. Franses, Philip Hans & Kloek, Teun & Lucas, Andre, 1998. "Outlier robust analysis of long-run marketing effects for weekly scanning data," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 293-315, November.
    8. Matteo Pelagatti & Bruno Bosco & Lucia Parisio & Fabio Baldi, 2007. "A Robust Multivariate Long Run Analysis of European Electricity Prices," Working Papers 2007.103, Fondazione Eni Enrico Mattei.
    9. Sen, Amit, 2008. "Behaviour of Dickey-Fuller tests when there is a break under the unit root null hypothesis," Statistics & Probability Letters, Elsevier, vol. 78(6), pages 622-628, April.
    10. Miguel Arranz & Alvaro Escribano, 2004. "Outliers - robust ECM cointegration tests based on the trend components," Spanish Economic Review, Springer;Spanish Economic Association, vol. 6(4), pages 243-266, December.
    11. Barry Falk & Chun-Hsuan Wang, 2003. "Testing long-run PPP with infinite-variance returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 471-484.
    12. Denis Fougère & Thierry Kamionka, 2003. "Bayesian inference for the mover-stayer model in continuous time with an application to labour market transition data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(6), pages 697-723.
    13. Kirstin Hubrich & Helmut Lutkepohl & Pentti Saikkonen, 2001. "A Review Of Systems Cointegration Tests," Econometric Reviews, Taylor & Francis Journals, vol. 20(3), pages 247-318.
    14. Lejeune, Bernard, 2009. "A diagnostic m-test for distributional specification of parametric conditional heteroscedasticity models for financial data," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 507-523, June.
    15. Boswijk, H. Peter & Lucas, Andre, 2002. "Semi-nonparametric cointegration testing," Journal of Econometrics, Elsevier, vol. 108(2), pages 253-280, June.
    16. D. Ventosa-Santaulària, 2009. "Spurious Regression," Journal of Probability and Statistics, Hindawi, vol. 2009, pages 1-27, August.
    17. Al-Sadoon, Majid M., 2017. "A unifying theory of tests of rank," Journal of Econometrics, Elsevier, vol. 199(1), pages 49-62.
    18. Ziping Zhao & Daniel P. Palomar, 2017. "Robust Maximum Likelihood Estimation of Sparse Vector Error Correction Model," Papers 1710.05513, arXiv.org.
    19. Roberto Baragona & Francesco Battaglia & Domenico Cucina, 2016. "Empirical Likelihood for Outlier Detection and Estimation in Autoregressive Time Series," Journal of Time Series Analysis, Wiley Blackwell, vol. 37(3), pages 315-336, May.
    20. Juhl, Ted, 2001. "Cointegration analysis using M estimators," Economics Letters, Elsevier, vol. 71(2), pages 149-154, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:econom:v:158:y:2010:i:1:p:37-50. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jeconom .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.