The role of initial values in nonstationary fractional time series models

Soren Johansen and Morten Nielsen

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We consider the nonstationary fractional model $\Delta^{d}X_{t}=\varepsilon _{t}$ with $\varepsilon_{t}$ i.i.d.$(0,\sigma^{2})$ and $d>1/2$. We derive an analytical expression for the main term of the asymptotic bias of the maximum likelihood estimator of $d$ conditional on initial values, and we discuss the role of the initial values for the bias. The results are partially extended to other fractional models, and three different applications of the theoretical results are given.

Keywords: Asymptotic expansion; bias; conditional inference; fractional integration; initial values; likelihood inference. (search for similar items in EconPapers)
JEL-codes: C22 (search for similar items in EconPapers)
Pages: 29
Date: 2012-11-08
New Economics Papers: this item is included in nep-ets
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: The role of initial values in nonstationary fractional time series models (2012)
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