Properties of Estimated Characteristic Roots

Bent Nielsen and Heino Bohn Nielsen
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Heino Bohn Nielsen: Department of Economics, University of Copenhagen

No 08-13, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: Estimated characteristic roots in stationary autoregressions are shown to give rather noisy information about their population equivalents. This is remarkable given the central role of the characteristic roots in the theory of autoregressive processes. In the asymptotic analysis the problems appear when multiple roots are present as this imply a non-differentiability so the δ-method does not apply, convergence rates are slow, and the asymptotic distribution is non-normal. In finite samples this has a considerable influence on the finite sample distribution unless the roots are far apart. With increasing order of the autoregressions it becomes increasingly difficult to place the roots far apart giving a very noisy signal from the characteristic roots.

Keywords: autoregression; characteristic root (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2008-05
New Economics Papers: this item is included in nep-ets
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Properties of etimated characteristic roots (2008)
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