Abstract

We have developed a new test against spurious long memory based on the invariance of long memory parameter to aggregation. By using the local Whittle estimator, the statistic takes the supremum among combinations of paired aggregated series. Simulations show that the test performs good in finite sample sizes, and is able to distinguish long memory from spurious processes with excellent power. Moreover, the empirical application gives further evidence that the observed long memory in German stock returns is spurious.

Original languageEnglish
Pages (from-to)1297-1311
Number of pages15
JournalJournal of Statistical Computation and Simulation
Volume81
Issue number10
DOIs
Publication statusPublished - Oct 2011

Keywords

  • Aggregation
  • Local whittle method
  • Spurious long memory

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