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Estimation of Dynamic Models with Nonparametric Simulated Maximum Likelihood

  • Per Frederiksen
  • Frank S. Nielsen

    ()

    (School of Economics and Management, University of Aarhus, Denmark and CREATES)

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    In this paper, we propose new tests for long memory in stationary and nonstationary time series possibly perturbed by short-run noise which may be serially correlated. The tests are all based on semiparametric estimators and exploit the self-similarity property of long memory processes. We o¤er simulation results that show good size properties of the tests, with power against spurious long memory. An empirical study of daily log-squared returns series of exchange rates and DJIA30 stocks shows that indeed there is long memory in exchange rate volatility and stock return volatility.

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    File URL: ftp://ftp.econ.au.dk/creates/rp/08/rp08_59.pdf
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    Paper provided by Department of Economics and Business Economics, Aarhus University in its series CREATES Research Papers with number 2008-59.

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    Length: 51
    Date of creation: 25 Nov 2008
    Date of revision:
    Handle: RePEc:aah:create:2008-59
    Contact details of provider: Web page: http://www.econ.au.dk/afn/

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    1. Soulier, Philippe, 2001. "Moment bounds and central limit theorem for functions of Gaussian vectors," Statistics & Probability Letters, Elsevier, vol. 54(2), pages 193-203, September.
    2. Arteche González, Jesús María, 2005. "Semiparametric estimation in perturbed long memory series," BILTOKI 2005-02, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
    3. Gil-Alana Luis A, 2003. "Fractional Integration with Bloomfield Disturbances in the Specification of Real Output in the G7 Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-15, September.
    4. Carlos Velasco, 2003. "Gaussian Semi-parametric Estimation of Fractional Cointegration," Journal of Time Series Analysis, Wiley Blackwell, vol. 24(3), pages 345-378, 05.
    5. Morten Oe. Nielsen, . "Efficient Likelihold Inference in Nonstationary Univariate Models," Economics Working Papers 2001-8, Department of Economics and Business Economics, Aarhus University.
    6. Clifford Hurvich & Eric Moulines & Philippe Soulier, 2004. "Estimating Long Memory in Volatility," Econometrics 0412006, EconWPA.
    7. Laurent-Emmanuel Calvet & Benoît B. Mandelbrot & Adlai J. Fisher, 2011. "A Multifractal Model of Asset Returns," Working Papers hal-00601870, HAL.
    8. Souza, Leonardo Rocha, 2003. "Temporal aggregation and bandwidth selection in estimating long memory," Economics Working Papers (Ensaios Economicos da EPGE) 478, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    9. Arteche, Josu, 2004. "Gaussian semiparametric estimation in long memory in stochastic volatility and signal plus noise models," Journal of Econometrics, Elsevier, vol. 119(1), pages 131-154, March.
    10. Francis X. Diebold & Atsushi Inoue, 2000. "Long Memory and Regime Switching," NBER Technical Working Papers 0264, National Bureau of Economic Research, Inc.
    11. Laurent Calvet & Adlai Fisher & Benoit Mandelbrot, 1997. "Large Deviations and the Distribution of Price Changes," Cowles Foundation Discussion Papers 1165, Cowles Foundation for Research in Economics, Yale University.
    12. Clifford M. Hurvich & Bonnie K. Ray, 2003. "The Local Whittle Estimator of Long-Memory Stochastic Volatility," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 1(3), pages 445-470.
    13. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
    14. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    15. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Ebens, Heiko, 2001. "The distribution of realized stock return volatility," Journal of Financial Economics, Elsevier, vol. 61(1), pages 43-76, July.
    16. Adlai Fisher & Laurent Calvet & Benoit Mandelbrot, 1997. "Multifractality of Deutschemark/US Dollar Exchange Rates," Cowles Foundation Discussion Papers 1166, Cowles Foundation for Research in Economics, Yale University.
    17. Velasco, Carlos, 1999. "Non-stationary log-periodogram regression," Journal of Econometrics, Elsevier, vol. 91(2), pages 325-371, August.
    18. Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996. "Fractionally integrated generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 74(1), pages 3-30, September.
    19. Deo, Rohit S. & Hurvich, Clifford M., 2001. "On The Log Periodogram Regression Estimator Of The Memory Parameter In Long Memory Stochastic Volatility Models," Econometric Theory, Cambridge University Press, vol. 17(04), pages 686-710, August.
    20. Frederiksen, Per & Nielsen, Frank S. & Nielsen, Morten Ørregaard, 2012. "Local polynomial Whittle estimation of perturbed fractional processes," Journal of Econometrics, Elsevier, vol. 167(2), pages 426-447.
    21. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 83-106, June.
    22. Souza, Leonardo Rocha, 2003. "The aliasing effect, the Fejer Kernel and temporally aggregated long memory processes," Economics Working Papers (Ensaios Economicos da EPGE) 470, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    23. Fabienne Comte & Eric Renault, 1998. "Long memory in continuous-time stochastic volatility models," Mathematical Finance, Wiley Blackwell, vol. 8(4), pages 291-323.
    24. repec:clu:wpaper:0102-19 is not listed on IDEAS
    25. Andersen T. G & Bollerslev T. & Diebold F. X & Labys P., 2001. "The Distribution of Realized Exchange Rate Volatility," Journal of the American Statistical Association, American Statistical Association, vol. 96, pages 42-55, March.
    26. Velasco, Carlos, 2000. "Non-Gaussian Log-Periodogram Regression," Econometric Theory, Cambridge University Press, vol. 16(01), pages 44-79, February.
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