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A New Simple Test Against Spurious Long Memory Using Temporal Aggregation

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  • Kuswanto, Heri

Abstract

We have developed a new test against spurious long memory based on the invariance of long memory parameter to aggregation. By using the local Whittle estimator, the statistic takes the supremum among combinations of paired aggregated series. Simulations show that the test performs good in finite sample sizes, and is able to distinguish long memory from spurious processes with excellent power. Moreover, the empirical application gives further evidence that the observed long memory in German stock returns is spurious.

Suggested Citation

  • Kuswanto, Heri, 2009. "A New Simple Test Against Spurious Long Memory Using Temporal Aggregation," Hannover Economic Papers (HEP) dp-425, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    • Handle: RePEc:han:dpaper:dp-425
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    File URL: http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-425.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Local-Whittle method; Spurious long memory; Change point; Aggregation;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: 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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