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A Study on "Spurious Long Memory in Nonlinear Time Series Models"

  • Kuswanto, Heri
  • Sibbertsen, Philipp

This paper discusses the existence of spurious long memory in common nonlinear time series models, namely Markov switching and threshold models. We describe the asymptotic behavior of the process in terms of autocovariance and autocorrelation function and support the theoretical evidences by providing Monte Carlo simulation. The existence of long memory in these nonlinear processes is induced by the nature of the process in certain conditions. In addition, GPH estimator itself introduces bias.

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File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-410.pdf
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Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-410.

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Length: 26 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:han:dpaper:dp-410
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  1. Guégan D., 2004. "How Can We Define The Concept of Long Memory? An Econometric Survey," School of Economics and Finance Discussion Papers and Working Papers Series 178, School of Economics and Finance, Queensland University of Technology.
  2. Liu, Ming, 2000. "Modeling long memory in stock market volatility," Journal of Econometrics, Elsevier, vol. 99(1), pages 139-171, November.
  3. Banerjee, Anindya & Urga, Giovanni, 2005. "Modelling structural breaks, long memory and stock market volatility: an overview," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 1-34.
  4. Dominique Guegan & Stéphanie Rioublanc, 2005. "Regime switching models : real or spurious long memory ?," Cahiers de la Maison des Sciences Economiques b05100, Université Panthéon-Sorbonne (Paris 1).
  5. Gilles DUFRENOT & Dominique GUEGAN & Anne PEGUIN-FEISSOLLE, 2003. "A SETAR model with long-memory dynamics," Econometrics 0309002, EconWPA.
  6. Davidson, James & Sibbertsen, Philipp, 2005. "Generating schemes for long memory processes: regimes, aggregation and linearity," Journal of Econometrics, Elsevier, vol. 128(2), pages 253-282, October.
  7. Diebold, Francis X. & Inoue, Atsushi, 2001. "Long memory and regime switching," Journal of Econometrics, Elsevier, vol. 105(1), pages 131-159, November.
  8. Gourieroux, Christian & Jasiak, Joann, 2001. "Memory and infrequent breaks," Economics Letters, Elsevier, vol. 70(1), pages 29-41, January.
  9. Breidt, F. Jay & Hsu, Nan-Jung, 2002. "A class of nearly long-memory time series models," International Journal of Forecasting, Elsevier, vol. 18(2), pages 265-281.
  10. van Dijk, Dick & Teräsvirta, Timo & Franses, Philip Hans, 2000. "Smooth Transition Autoregressive Models - A Survey of Recent Developments," SSE/EFI Working Paper Series in Economics and Finance 380, Stockholm School of Economics, revised 17 Jan 2001.
  11. Kuswanto, Heri & Sibbertsen, Philipp, 2007. "Can we distinguish between common nonlinear time series models and long memory?," Hannover Economic Papers (HEP) dp-380, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  12. Leipus, Remigijus & Paulauskas, Vygantas & Surgailis, Donatas, 2005. "Renewal regime switching and stable limit laws," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 299-327.
  13. William R. Parke, 1999. "What Is Fractional Integration?," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 632-638, November.
  14. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  15. Carrasco, Marine, 2002. "Misspecified Structural Change, Threshold, and Markov-switching models," Journal of Econometrics, Elsevier, vol. 109(2), pages 239-273, August.
  16. Rohit Deo & Meng-Chen Hsieh & Clifford M. Hurvich & Philippe Soulier, 2007. "Long Memory in Nonlinear Processes," Papers 0706.1836, arXiv.org.
  17. Granger, Clive W. J. & Ding, Zhuanxin, 1996. "Varieties of long memory models," Journal of Econometrics, Elsevier, vol. 73(1), pages 61-77, July.
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