Local Powers of the MLE-Based Test for the Panel Fractional Ornstein-Uhlenbeck Process

Katsuto Tanaka

Gakushuin Economic Papers, 2021, vol. 57, issue 4, 169-182

Abstract: We consider the testing problem associated with the panel or longitudinal fractional Ornstein-Uhlenbeck (fO-U) processes driven by independent fractional Brownian motions (fBms), where the sign of the drift parameter of each fO-U process is tested, assuming that the Hurst parameter H is known. Since the test has a trivial consistent property against a fixed alternative, we employ the local alternative hypothesis that the drift parameter is close to the null in the order of 1/(TN^η), where T is the sampling span and N is the cross section dimension. Then, for a given value of H, we compute the local power as N increases with any T.

Date: 2021
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