An Analytical Evaluation of the Log-periodogram Estimate in the Presence of Level Shifts

Pierre Perron () and Zhongjun Qu ()
Additional contact information
Zhongjun Qu: Department of Economics, Boston University,

No wp2007-044, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: Recently, there has been an upsurge of interest on the possibility of confusing long memory and structural changes in level. Many studies have shown that when a stationary short memory process is contaminated by level shifts the estimate of the fractional differencing parameter is biased away from zero and the autocovariance function exhibits a slow rate of decay, akin to a long memory process. We analyze the properties of the log periodogram estimate of the memory parameter when the jump component is specified by a simple mixture model. Our theoretical results explain many findings reported and uncover new features. Simulations are presented to highlight the properties of the distributions and to assess the adequacy of our approximations. We also show the usefulness of our results to distinguish between long memory and level shifts via an application to the volatility of daily returns for wheat commodity futures.

Keywords: structural change; jumps; long memory processes; fractional integration; Poisson process; frequency domain estimates (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Date: 2007-10
View list of references View citations in EconPapers

Downloads: (external link)
http://people.bu.edu/perron/papers/periodogram.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bos:wpaper:wp2007-044

Access Statistics for this paper

More papers in Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics
Contact information at EDIRC.
Series data maintained by Ashley Seamans ().