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Estimation Biases, Size and Power of a Test on the Long Memory Parameter in ARFIMA Models

Elkin Castaño, Santiago Gallón and Karoll Gomez

Lecturas de Economía, 2010, issue 73, 131-148

Abstract: Castaño et al. (2008) proposed a test to investigate the existence of long memory based on the fractional differencing parameter of an ARFIMA (p, d, q) model. They showed that using an autoregressive approximation with order equal to the nearest integer of p* = T1/3 for the short-term component of this model, the test for the short memory null hypothesis against the long memory alternative hypothesis has greater power than other long memory tests, and also has an adequate size. We studied the estimation bias generated on d, and the effect on the power and size of the test when the short-term component is ignored and when the used models do not approximate it adequately. Additionally we analyze whether the obtained results by Castaño et al. (2008) can be improved employing a different autoregressive approximation

Keywords: Hypothesis testing; time-series models (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Date: 2010
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Handle: RePEc:lde:journl:y:2010:i:73:p:131-148