Bias-Reduced Log-Periodogram And Whittle Estimation Of The Long-Memory Parameter Without Variance Inflation

The bias-reduced log-periodogram estimator of Andrews and Guggenberger (2003, Econometrica 71, 675–712) for the long-memory parameter d in a stationary long-memory time series reduces the asymptotic bias of the original log-periodogram estimator of Geweke and Porter-Hudak (1983) by an order of magnitude but inflates the asymptotic variance by a multiplicative constant cr, for example, c1 = 2.25 and c2 = 3.52. In this paper, we introduce a new, computationally attractive estimator by taking a weighted average of estimators over different bandwidths. We show that, for each fixed r ≥ 0, the new estimator can be designed to have the same asymptotic bias properties as but its asymptotic variance is changed by a constant cr* that can be chosen to be as small as desired, in particular smaller than cr. The same idea is also applied to the local-polynomial Whittle estimator in Andrews and Sun (2004, Econometrica 72, 569–614) leading to the weighted estimator . We establish the asymptotic bias, variance, and mean-squared error of the weighted estimators and show their asymptotic normality. Furthermore, we introduce a data-dependent adaptive procedure for selecting r and the bandwidth m and show that up to a logarithmic factor, the resulting adaptive weighted estimator achieves the optimal rate of convergence. A Monte Carlo study shows that the adaptive weighted estimator compares very favorably to several other adaptive estimators.We thank a co-editor and three referees for very helpful suggestions. We are grateful for the constructive comments offered by Marc Henry, Javier Hidalgo, and especially Katsumi Shimotsu.