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Periodic correlation vs. integration and cointegration (Okresowa korelacja a integracja i kointegracja)

Author

Listed:
  • Ewa Broszkiewicz-Suwaj
  • Agnieszka Wylomanska

Abstract

In this paper we present a new approach to integration and cointegration. We show that a periodically correlated time series can be divided in a natural way into subseries that are integrated. Moreover, with high probability they are cointegrated. Therefore it is enough to show periodic correlation of the original series to conclude that the subseries are integrated. In the first part of the paper we present the main features of periodically correlated processes and a method of detecting periodic correlation. We illustrate it using a data set of spot electricity prices from the Nord Pool Power Exchange. In the next section we show that the subseries (one for each day of the week) exhibit integration as well as cointegration.

Suggested Citation

  • Ewa Broszkiewicz-Suwaj & Agnieszka Wylomanska, 2004. "Periodic correlation vs. integration and cointegration (Okresowa korelacja a integracja i kointegracja)," HSC Research Reports HSC/04/04, Hugo Steinhaus Center, Wroclaw University of Technology.
    • Handle: RePEc:wuu:wpaper:hsc0404
    as

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    File URL: http://www.im.pwr.wroc.pl/~hugo/RePEc/wuu/wpaper/HSC_04_04.pdf
    File Function: Draft, 2004 (in Polish)
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    References listed on IDEAS

    as
    1. Broszkiewicz-Suwaj, E & Makagon, A & Weron, R & Wyłomańska, A, 2004. "On detecting and modeling periodic correlation in financial data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 336(1), pages 196-205.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cointegration; Integration; PARMA model; Periodic correlation;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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