A New Test for Short Memory in Long Memory Time Series

Timothy A. C. Hughes and Jaechoul Lee

The American Statistician, 2015, vol. 69, issue 3, 182-190

Abstract: This article considers short memory characteristics in a long memory process. We derive new asymptotic results for the sample autocorrelation difference ratios. We used these results to develop a new portmanteau test that determines if short memory parameters are statistically significant. In simulations, the new test can detect short memory components more often than the Ljung-Box test when these short memory components are in fact within a long memory process. Interestingly, our test finds short memory autocorrelations in U.S. inflation rate data, whereas the Ljung-Box test fails to find these autocorrelations. Modeling these short memory autocorrelations of the inflation rate data leads to improved model accuracy and more precise prediction.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:taf:amstat:v:69:y:2015:i:3:p:182-190

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DOI: 10.1080/00031305.2015.1056829

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