The role of initial values in nonstationary fractional time series models

Soren Johansen and Morten Nielsen

No 12-18, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: We consider the nonstationary fractional model Delta^d Xt = epsilon t with epsilon t i.i.d.(0;sigma^2) and d > 1/2. We derive an analytical expression for the main term of the asymptotic biasof the maximum likelihood estimator of d conditional on initial values, and we discussthe 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: 30 pages
Date: 2012-11-08
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Citations: View citations in EconPapers (7)

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