Fractional Integration Methods and Short Time Series: Evidence from a Simulation Study

Agnar Freyr Helgason

Political Analysis, 2016, vol. 24, issue 1, 59-68

Abstract: Grant and Lebo (2016) and Keele, Linn, and Webb (2016) provide diverging recommendations to analysts working with short time series that are potentially fractionally integrated. While Grant and Lebo are quite positive about the prospects of fractionally differencing such data, Keele, Linn, and Webb argue that estimates of fractional integration will be highly uncertain in short time series. In this study, I simulate fractionally integrated data and compare estimates from the general error correction model (GECM), which disregards fractional integration, to models using fractional integration methods over thirty-two simulation conditions. I find that estimates of short-run effects are similar across the two models, but that models using fractionally differenced data produce superior predictions of long-run effects for all sample sizes when there are no short-run dynamics included. When short-run dynamics are included, the GECM outperforms the alternative model, but only in time series that consist of under 250 observations.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

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: https://EconPapers.repec.org/RePEc:cup:polals:v:24:y:2016:i:1:p:59-68_6

Access Statistics for this article

More articles in Political Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().