The Estimation and Testing of the Cointegration Order Based on the Frequency Domain

Souza, Igor Viveiros; Reisen, Valdério Anselmo; Franco, G. A. P.; Bondon, Pascal

doi:10.1080/07350015.2016.1251442

Cited by 13 publications

(47 citation statements)

References 26 publications

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“…Table 1 displays size results based on DGP 1 with δ m = 0.75. The methods that have well defined asymptotic properties across all parameter constellations covered in the table are those of Nielsen and Shimotsu (2007), Chen and Hurvich (2006), Hualde and Velasco (2008), and Souza et al (2018). It can be observed that all of these methods achieve good size properties for ρ = 0, except for the test of Chen and Hurvich (2006), when d = 0.4.…”

Section: Monte Carlo Studymentioning

confidence: 94%

“…For a bivariate process with known d ∈ (0, 1], Souza et al (2018) propose a test based on an estimate of b obtained from the determinant of the trimmed and truncated spectral matrix of the fractionally differenced process via a log-periodogram regression. Denote the fractionally differenced process by…”

Section: Tests Based On the Spectral Matrixmentioning

confidence: 99%

“…We use m = T δ m with δ m = {0.55, 0.75} to account for sensitivities regarding bandwidth choice. With regard to the other bandwidth choices, we follow the recommendations by the authors: m 1 = T δ m −0.1 and p(T ) = m −0.3 1 for Nielsen and Shimotsu (2007) or Robinson and Yajima (2002), l = 1 for Souza et al (2018), m 3 = 25 for Chen and Hurvich (2006), c 0 = 0.3, j 0 = 5 and k 0 = 20 for Zhang et al (2019), and for Marmol and Velasco (2004) we set m = T 2/3 and m 2 = T δ m . All tests are carried out allowing for a non-zero mean.…”

Section: Monte Carlo Studymentioning

confidence: 99%

“…Semiparametric approaches, on the other hand, have the advantage that they allow the researcher to focus on the long-run relationship between the series and do not require the specification of short-run dynamics. This literature encompasses the spectral-based rank estimation procedure of Robinson and Yajima (2002) and its extension by Nielsen and Shimotsu (2007), a Hausmann-type test based on the multivariate local Whittle estimator introduced by Robinson (2008a), a number of residual-based tests for the null hypothesis of no fractional cointegration developed by Marmol and Velasco (2004), Chen and Hurvich (2006), Hualde and Velasco (2008), and Wang et al (2015), a variance-ratio test proposed by Nielsen (2010), a test based on a GPH-type estimate of the cointegration strength introduced by Souza et al (2018) and a rank estimation procedure based on an eigenanalysis of the autocovariance function from Zhang et al (2019).…”

Section: Introductionmentioning

confidence: 99%

“…The relative performance in terms of power depends on the form of the system. For triangular systems and non-stationary commoncomponents models the test of Souza et al (2018) performs best overall, whereas the test of Chen and Hurvich (2006) is preferable for stationary common-components models.…”

Section: Introductionmentioning

confidence: 99%

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A comparison of semiparametric tests for fractional cointegration

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There are various competing procedures to determine whether fractional cointegration is present in a multivariate time series, but no standard approach has emerged. We provide a synthesis of this literature and conduct a detailed comparative Monte Carlo study to guide empirical researchers in their choice of appropriate methodologies. Special attention is paid on empirically relevant issues such as assumptions about the form of the underlying process and the ability of the procedures to distinguish between short-run correlation and long-run equilibria. It is found that several approaches are severely oversized in presence of correlated short-run components and that the methods show different performance in terms of power when applied to common-component models instead of triangular systems.

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Section: Monte Carlo Studymentioning

confidence: 94%

Section: Tests Based On the Spectral Matrixmentioning

confidence: 99%

Section: Monte Carlo Studymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Estimating the volatility of asset pricing factors

Becker

Leschinski

2020

Journal of Forecasting

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Models based on factors such as size or value are ubiquitous in asset pricing.Therefore, portfolio allocation and risk management require estimates of the volatility of these factors. While realized volatility has become a standard tool for liquid assets, this measure is difficult to obtain for asset pricing factors such as size and value that include smaller illiquid stocks that are not traded at a high frequency. Here, we provide a simple approach to estimate the volatility of these factors. The efficacy of this approach is demonstrated using Monte Carlo simulations and forecasts of the market volatility.

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Measuring macroeconomic convergence and divergence within EMU using long memory

2023

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This paper tests for convergence of EMU inflation rates and industrial production by testing for the existence of fractional cointegration relations. The notion of fractional cointegration allows for long-term equilibria with a higher degree of persistence than allowed for in the standard cointegration framework. Over the full sample from 1999:Q1–2021:Q4, we find evidence of fractional cointegration in both inflation and industrial production among many country pairs. Our results suggest some evidence for “convergence clusters” among either core or periphery countries in the case of inflation. Similarly, we find stronger evidence of cointegration pairs among core countries for industrial production compared to periphery or mixed core–periphery groups. Testing for a break in the persistence structure, the results show evidence of a break in the persistence of both inflation and industrial production in a number of countries. Inflation persistence is substantially higher after the break, suggesting a higher potential for diverging processes during economic crises. On the contrary, for the case of industrial production, persistence is lower during the post-crisis period.

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The Estimation and Testing of the Cointegration Order Based on the Frequency Domain

Cited by 13 publications

References 26 publications

A comparison of semiparametric tests for fractional cointegration

A comparison of semiparametric tests for fractional cointegration

Estimating the volatility of asset pricing factors

Measuring macroeconomic convergence and divergence within EMU using long memory

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