Nonlinear Log-Periodogram Regression for Perturbed Fractional Processes

Yixiao Sun and Peter Phillips

No 1366, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper studies fractional processes that may be perturbed by weakly dependent time series. The model for a perturbed fractional process has a components framework in which there may be components of both long and short memory. All commonly used estimates of the long memory parameter (such as log periodogram (LP) regression) may be used in a components model where the data are affected by weakly dependent perturbations, but these estimates can suffer from serious downward bias. To circumvent this problem, the present paper proposes a new procedure that allows for the possible presence of additive perturbations in the data. The new estimator resembles the LP regression estimator but involves an additional (nonlinear) term in the regression that takes account of possible perturbation effects in the data. Under some smoothness assumptions at the origin, the bias of the new estimator is shown to disappear at a faster rate than that of the LP estimator, while its asymptotic variance is inflated only by a multiplicative constant. In consequence, the optimal rate of convergence to zero of the asymptotic MSE of the new estimator is faster than that of the LP estimator. Some simulation results demonstrate the viability and the bias-reducing feature of the new estimator relative to the LP estimator in finite samples. A test for the presence of perturbations in the data is given.

Keywords: Asymptotic bias; Asymptotic normality; Bias reduction; Fractional components model; Perturbed fractional process; Rate of convergence; Testing perturbations (search for similar items in EconPapers)
JEL-codes: C13 C14 C22 C51 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2002-05
Note: CFP 1077.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Econometrics (2003), 115(2): 355-389

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