Log-Periodogram Estimation of the Long-Memory Parameter: An Evaluation of Competing Estimators

Saeed Heravi () and Kerry Patterson ()
Additional contact information
Saeed Heravi: Cardiff Business School, University of Wales
Kerry Patterson: Department of Economics, University of Reading

No em-dp2013-02, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: This study evaluates a number of methods of reducing the bias and mean squared error of log-periodogram (LP) based methods to estimate the long-memory parameter and, in addition, assesses the actual coverage of the associated confidence intervals, considering both tails and the width of the interval. This is critical as previous results concentrating on two-sided intervals may mask severe distortion in one tail. The evaluation includes: developments of the Geweke and Porter-Hudak (GPH) method due to Hurvich and Deo (1999) and Andrews and Guggenberger (AG, 2003); the weighted LP, WLP, estimator due to Guggenberger and Sun (GS, 2004, 2006); and a frequency-based bootstrap method to improve estimator performance. A central problem in the application of these methods is the selection of the number of frequencies, m, to be included in the LP regression. A frequently used, but generally unsatisfactory, solution is to use a fixed number of frequencies of the form m = n^alpha where, for example, alpha = 0.5 (the square-root rule) or 0.7; in contrast we use a plug-in method to obtain a feasible first-order bias reduced estimator. Including infeasible, feasible and bootstrapped variations, 11 estimators are considered and the simulations suggest that whilst there is no single dominant estimation method, the bootstrapped versions associated with each method generally offer significant gains over the standard versions for coverage rate accuracy. Overall, the bootstrapped WLP estimator is superior for 'moderate' serial correlation in the short-run dynamics and offers a significant reduction in the average width of the confidence intervals. The results are illustrated with data on the Nile river flow and the gold-silver price.

Keywords: Long memory; bootstrapb log-periodogram regression; weighted LP regression (search for similar items in EconPapers)
JEL-codes: C1 C14 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2013-09-09
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.reading.ac.uk/web/FILES/economics/emdp2013099.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rdg:emxxdp:em-dp2013-02

Access Statistics for this paper

More papers in Economics Discussion Papers from Department of Economics, University of Reading Contact information at EDIRC.
Bibliographic data for series maintained by Alexander Mihailov ().