A New Simple Test Against Spurious Long Memory Using Temporal Aggregation

Heri Kuswanto

Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover from Universität Hannover, Wirtschaftswissenschaftliche Fakultät

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.

Keywords: Local-Whittle method; Spurious long memory; Change point; Aggregation (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2009-08
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Persistent link: http://EconPapers.repec.org/RePEc:han:dpaper:dp-425

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