Asymptotics for duration-driven long range dependent processes

DOI10.1016/J.JECONOM.2006.12.001MaRDI QIDQ289190zbMATH OpenOpenAlexFDO

Authors Meng-Chen Hsieh, Clifford Hurvich, Philippe Soulier

Publication date 27 May 2016

Published in Journal of Econometrics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0705.2701

zbMATH Keywords

heavy tailslong memorydiscrete Fourier transformsample autocovariances

Mathematics Subject Classification ID

Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Asymptotic distribution theory in statistics (62E20) Applications of statistics to actuarial sciences and financial mathematics (62P05) Inference from stochastic processes and spectral analysis (62M15)

Abstract: We consider processes with second order long range dependence resulting from heavy tailed durations. We refer to this phenomenon as duration-driven long range dependence (DDLRD), as opposed to the more widely studied linear long range dependence based on fractional differencing of an $iid$ process. We consider in detail two specific processes having DDLRD, originally presented in Taqqu and Levy (1986), and Parke (1999). For these processes, we obtain the limiting distribution of suitably standardized discrete Fourier transforms (DFTs) and sample autocovariances. At low frequencies, the standardized DFTs converge to a stable law, as do the standardized sample autocovariances at fixed lags. Finite collections of standardized sample autocovariances at a fixed set of lags converge to a degenerate distribution. The standardized DFTs at high frequencies converge to a Gaussian law. Our asymptotic results are strikingly similar for the two DDLRD processes studied. We calibrate our asymptotic results with a simulation study which also investigates the properties of the semiparametric log periodogram regression estimator of the memory parameter.

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