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A Simple Fractionally Integrated Model with a Time-varying Long Memory Parameter d t

  • Mohamed Boutahar
  • Gilles Dufrénot
  • Anne Péguin-Feissolle

    ()

This paper generalizes the standard long memory modeling by assuming that the long memory parameter d is stochastic and time varying: we introduce a STAR process on this parameter characterized by a logistic function. We propose an estimation method of this model. Some simulation experiments are conducted. The empirical results suggest that this new model offers an interesting alternative competing framework to describe the persistent dynamics in modelling some financial series.

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File URL: http://hdl.handle.net/10.1007/s10614-007-9115-1
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Article provided by Society for Computational Economics in its journal Computational Economics.

Volume (Year): 31 (2008)
Issue (Month): 3 (April)
Pages: 225-241

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Handle: RePEc:kap:compec:v:31:y:2008:i:3:p:225-241
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  1. Bhardwaj, Geetesh & Swanson, Norman R., 2006. "An empirical investigation of the usefulness of ARFIMA models for predicting macroeconomic and financial time series," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 539-578.
  2. Gilles Dufrénot & Dominique Guegan & Anne Peguin-Feissolle, 2005. "Modelling squared returns using a SETAR model with long-memory dynamics," Post-Print halshs-00179285, HAL.
  3. Robert F. Engle & Aaron D. Smith, 1999. "Stochastic Permanent Breaks," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 553-574, November.
  4. Katsumi Shimotsu & Peter C.B. Phillips, 2000. "Local Whittle Estimation in Nonstationary and Unit Root Cases," Cowles Foundation Discussion Papers 1266, Cowles Foundation for Research in Economics, Yale University, revised Sep 2003.
  5. Smallwood Aaron D, 2005. "Joint Tests for Non-linearity and Long Memory: The Case of Purchasing Power Parity," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(2), pages 1-30, June.
  6. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  7. Franses, Ph.H.B.F. & Ooms, M. & Bos, C.S., 1998. "Long memory and level shifts: re-analysing inflation rates," Econometric Institute Research Papers EI 9811, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
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  9. Lux, T. & M. Marchesi, . "Scaling and Criticality in a Stochastic Multi-Agent Model of a Financial Market," Discussion Paper Serie B 438, University of Bonn, Germany, revised Jul 1998.
  10. Katsumi Shimotsu, 2006. "Exact Local Whittle Estimation of Fractional Integration with Unknown Mean and Time Trend," Working Papers 1061, Queen's University, Department of Economics.
  11. Diebold, Francis X. & Inoue, Atsushi, 2001. "Long memory and regime switching," Journal of Econometrics, Elsevier, vol. 105(1), pages 131-159, November.
  12. Alain Hecq, 2009. "Asymmetric business cycle co-movements," Applied Economics Letters, Taylor & Francis Journals, vol. 16(6), pages 579-584.
  13. Lobato, I.N. & Savin, N.E., 1996. "Real and Spurious Long Memory Properties of Stock Market Data," Working Papers 96-07, University of Iowa, Department of Economics.
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  16. Dufrenot, Gilles & Guegan, Dominique & Peguin-Feissolle, Anne, 2005. "Modelling squared returns using a SETAR model with long-memory dynamics," Economics Letters, Elsevier, vol. 86(2), pages 237-243, February.
  17. Mohamed Boutahar & Imene Mootamri & Anne Peguin-Feissolle, 2007. "An exponential FISTAR model applied to the US real effective exchange rate," Working Papers halshs-00353836, HAL.
  18. Benassi, Albert & Cohen, Serge & Istas, Jacques, 1998. "Identifying the multifractional function of a Gaussian process," Statistics & Probability Letters, Elsevier, vol. 39(4), pages 337-345, August.
  19. Dufrénot, Gilles & Lardic, Sandrine & Mathieu, Laurent & Mignon, Valérie & Péguin-Feissolle, Anne, 2008. "Explaining the European exchange rates deviations: Long memory or non-linear adjustment?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(3), pages 207-215, July.
  20. Shimotsu, Katsumi & Phillips, Peter C.B., 2006. "Local Whittle estimation of fractional integration and some of its variants," Journal of Econometrics, Elsevier, vol. 130(2), pages 209-233, February.
  21. Michel Beine & Sebastien Laurent, 2000. "Structural Change and Long Memory in Volatility: New Evidence from Daily Exchange Rates," Econometric Society World Congress 2000 Contributed Papers 0312, Econometric Society.
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  23. Anne Peguin-Feissolle & Gilles Dufrénot & Dominique Guegan, 2006. "Changing-regime volatility : A fractionally integrated SETAR model," Working Papers halshs-00410540, HAL.
  24. Giuseppe Storti & Alessandra Amendola, 2000. "A Non Linear Time Series Approach To Modelling Asymmetry In Stock Market Indexes," Computing in Economics and Finance 2000 97, Society for Computational Economics.
  25. Andersen, Torben G & Bollerslev, Tim, 1998. "Answering the Skeptics: Yes, Standard Volatility Models Do Provide Accurate Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 885-905, November.
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