The effect of round-off error on long memory processes

DOI10.1515/SNDE-2013-0011MaRDI QIDQ905390zbMATH OpenOpenAlexFDO

Authors Gabriele La Spada, Fabrizio Lillo

Publication date 19 January 2016

Published in Studies in Nonlinear Dynamics & Econometrics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1107.4476

zbMATH Keywords

measurement errordetrended fluctuation analysislong memory processesround-off errorlocal Whittle estimator

Mathematics Subject Classification ID

Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Gaussian processes (60G15) Non-Markovian processes: estimation (62M09) Inference from stochastic processes and spectral analysis (62M15) Roundoff error (65G50)

Abstract: We study how the round-off (or discretization) error changes the statistical properties of a Gaussian long memory process. We show that the autocovariance and the spectral density of the discretized process are asymptotically rescaled by a factor smaller than one, and we compute exactly this scaling factor. Consequently, we find that the discretized process is also long memory with the same Hurst exponent as the original process. We consider the properties of two estimators of the Hurst exponent, namely the local Whittle (LW) estimator and the Detrended Fluctuation Analysis (DFA). By using analytical considerations and numerical simulations we show that, in presence of round-off error, both estimators are severely negatively biased in finite samples. Under regularity conditions we prove that the LW estimator applied to discretized processes is consistent and asymptotically normal. Moreover, we compute the asymptotic properties of the DFA for a generic (i.e. non Gaussian) long memory process and we apply the result to discretized processes.

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