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Estimation of fractional integration in the presence of data noise

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  • Haldrup, Niels
  • Nielsen, Morten Orregaard

Abstract

The paper presents a comparative study on the performance of commonly used estimators of the fractional order of integration when data is contaminated by noise. In particular, measurement errors, additive outliers, temporary change outliers, and structural change outliers are addressed. It occurs that when the sample size is not too large, as is frequently the case for macroeconomic data, then non-persistent noise will generally bias the estimators of the memory parameter downwards. On the other hand, relatively more persistent noise like temporary change outliers and structural changes can have the opposite effect and thus bias the fractional parameter upwards. Surprisingly, with respect to the relative performance of the various estimators, the parametric conditional maximum likelihood estimator with modelling of the short run dynamics clearly outperforms the semiparametric estimators in the presence of noise that is not too persistent.
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  • Haldrup, Niels & Nielsen, Morten Orregaard, 2007. "Estimation of fractional integration in the presence of data noise," Computational Statistics & Data Analysis, Elsevier, vol. 51(6), pages 3100-3114, March.
    • Handle: RePEc:eee:csdana:v:51:y:2007:i:6:p:3100-3114
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    More about this item

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: 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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