Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5097604 | Journal of Econometrics | 2006 | 29 Pages |
Abstract
We consider semiparametric frequency domain analysis of cointegration between long memory processes, i.e. fractional cointegration, allowing derivation of useful long-run relations even among stationary processes. The approach is due to Robinson (1994b. Annals of Statistics 22, 515-539) and uses a degenerating part of the periodogram near the origin to form a narrow-band frequency domain least squares (FDLS) estimator of the cointegrating relation, which is consistent for arbitrary short-run dynamics. We derive the asymptotic distribution theory for the FDLS estimator of the cointegration vector in the stationary long memory case, thus complementing Robinson's consistency result. An application to the relation between the volatility realized in the stock market and the associated implicit volatility derived from option prices is offered.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Statistics and Probability
Authors
Bent Jesper Christensen, Morten Ãrregaard Nielsen,