Nearly unstable integer‐valued ARCH process and unit root testing

DOI10.1111/SJOS.12689arXiv2107.07963OpenAlexW3185525343MaRDI QIDQ6196809FDOQ6196809

Authors: Wagner Barreto-Souza, Ngai Hang Chan 

Publication date: 15 March 2024

Published in: Scandinavian Journal of Statistics (Search for Journal in Brave)

Abstract: This paper introduces a Nearly Unstable INteger-valued AutoRegressive Conditional Heteroskedasticity (NU-INARCH) process for dealing with count time series data. It is proved that a proper normalization of the NU-INARCH process endowed with a Skorohod topology weakly converges to a Cox-Ingersoll-Ross diffusion. The asymptotic distribution of the conditional least squares estimator of the correlation parameter is established as a functional of certain stochastic integrals. Numerical experiments based on Monte Carlo simulations are provided to verify the behavior of the asymptotic distribution under finite samples. These simulations reveal that the nearly unstable approach provides satisfactory and better results than those based on the stationarity assumption even when the true process is not that close to non-stationarity. A unit root test is proposed and its Type-I error and power are examined via Monte Carlo simulations. As an illustration, the proposed methodology is applied to the daily number of deaths due to COVID-19 in the United Kingdom.

Full work available at URL: https://arxiv.org/abs/2107.07963

zbMATH Keywords

inferencelimit theoremscount time seriesstochastic integralCox-Ingersoll-Ross diffusion process

Mathematics Subject Classification ID

Statistics (62-XX)

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