SMALL-SAMPLE LIKELIHOOD-BASED INFERENCE IN THE ARFIMA MODEL

Offer Lieberman, Judith Rousseau and David M. Zucker

Econometric Theory, 2000, vol. 16, issue 2, 231-248

Abstract: The autoregressive fractionally integrated moving average (ARFIMA) model has become a popular approach for analyzing time series that exhibit long-range dependence. For the Gaussian case, there have been substantial advances in the area of likelihood-based inference, including development of the asymptotic properties of the maximum likelihood estimates and formulation of procedures for their computation. Small-sample inference, however, has not to date been studied. Here we investigate the small-sample behavior of the conventional and Bartlett-corrected likelihood ratio tests (LRT) for the fractional difference parameter. We derive an expression for the Bartlett correction factor. We investigate the asymptotic order of approximation of the Bartlett-corrected test. In addition, we present a small simulation study of the conventional and Bartlett-corrected LRT's. We find that for simple ARFIMA models both tests perform fairly well with a sample size of 40 but the Bartlett-corrected test generally provides an improvement over the conventional test with a sample size of 20.

Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:cup:etheor:v:16:y:2000:i:02:p:231-248_16

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