A test for the existence of a fractional root in a non-stationary time series

Diego Lemus and Elkin Castaño

Lecturas de Economía, 2013, issue 78, 151-184

Abstract: In this work, we present a modification of the hypothesis testing procedure for the existence of long memory in the stationary and invertible ARFIMA(p,d,q) process proposed by Castaño, Gómez and Gallón (2008). This modification allows assessing the existence of a fractional root in a non-stationary time series when the short-term ARMA component is undetermined or unknown, especially in ARFIMA(p,d,q) processes. We validate, via Monte Carlo simulations, the analytical results and demonstrate the good performance of the proposed test in terms of both power and size, in comparison to other well-known tests in the literature.

Keywords: Long memory time series; fractional differencing parameter; autoregressive approximation; nonstationary ARFIMA process (search for similar items in EconPapers)
JEL-codes: C15 C22 C52 (search for similar items in EconPapers)
Date: 2013
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