On Model Approximation for Long-Memory Processes: A Cautionary Result

Clive Granger

Annals of Economics and Finance, 2001, vol. 2, issue 1, 97-100

Abstract: It is pointed out that if the generating mechanism is a fraction integrated process I(d), where d can be less than 1/2, but a simple ARMA model is fitted, a consistent estimation procedure is likely to produce a unit root. Thus the properties of the fitted model will be quite unlike those of the generating mechanism.

Date: 2001
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