Fractional integration and data frequency

Luis Gil-Alana and Guglielmo Maria Caporale

No 10/08, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: This paper examines the robustness of fractional integration estimates to different data frequencies. We show by means of Monte Carlo experiments that if the number of differences is an integer value (e.g., 0 or 1) there is no distortion when data are collected at wider intervals; however, if it is a fractional value, the distortion increases as the number of periods between the observations increases, which results in lower orders of integration than those of the true DGP. An empirical application using the S&P500 index is also carried out.

Pages: 24 pages
Date: 2008-11-20
New Economics Papers: this item is included in nep-ecm and nep-ets
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