A simple non-linear model with fractional integration for financial time series data

Luis Gil-Alana

International Review of Financial Analysis, 2008, vol. 17, issue 5, 838-848

Abstract: This paper provides several examples of simple non-linear time series models with fractionally integrated disturbances. Both types of models (non-linear and fractional integration) have been widely used in recent years when modeling financial data. We use a testing procedure that permits us to test the order of integration in raw time series in the context of non-linear models. The tests are applied to several financial time series, the results showing that when the non-linear sign structure is taken into account, the order of integration of the series is much higher than one, finding thus conclusive evidence against mean reversion in their behavior.

Keywords: Fractional; integration; Long; memory; Monte; Carlo; simulations; Stock; market (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:17:y:2008:i:5:p:838-848

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