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A Comparative Study of the Performance of Estimating Long-Memory Parameter Using Wavelet-Based Entropies

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  • Heni Boubaker

    (IPAG Business School)

Abstract

In this paper, we discuss the performance of four estimators in the wavelet domain in order to estimate the parameter of stationary long-memory models. The goal of our article is to construct a wavelet estimate for the fractional differencing parameter d where the selection of the optimal level of the multiresolution decomposition is given by three entropies-based approaches, as alternative to subjective determination of the multiscale wavelet decomposition methodology. We have shown by Monte Carlo experiments that the concentration in an $$l^{p}$$ l p norm entropy-based procedure improves considerably the other suggested entropy-based determination of the optimal decomposition level considered. The simulation results also show that the concentration in an $$l^{p}$$ l p norm entropy-related criterion and the maximum scale decomposition method performs better in most cases and provides evidence of the power of the wavelet methods. We then applied wavelet-entropy estimators to some daily stock market indices.

Suggested Citation

  • Heni Boubaker, 2016. "A Comparative Study of the Performance of Estimating Long-Memory Parameter Using Wavelet-Based Entropies," Computational Economics, Springer;Society for Computational Economics, vol. 48(4), pages 693-731, December.
  • Handle: RePEc:kap:compec:v:48:y:2016:i:4:d:10.1007_s10614-015-9541-4
    DOI: 10.1007/s10614-015-9541-4
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    Cited by:

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    2. Yu, Miao & Yu, Keshu & Han, Tianze & Wan, Yuming & Zhao, Dongwei, 2020. "Research on application of fractional calculus in signal analysis and processing of stock market," Chaos, Solitons & Fractals, Elsevier, vol. 131(C).

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    More about this item

    Keywords

    Long-memory; Wavelet estimation; Entropy; Monte Carlo simulation;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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