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Social and Behavioral Sciences Commons

Open Access. Powered by Scholars. Published by Universities.®

Singapore Management University

2016

Research Collection School Of Economics

Long memory

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Full-Text Articles in Social and Behavioral Sciences

Weak Convergence To Stochastic Integrals For Econometric Applications, Hanying Liang, Peter C. B. Phillips, Hanchao Wang, Qiying Wang Dec 2016

Weak Convergence To Stochastic Integrals For Econometric Applications, Hanying Liang, Peter C. B. Phillips, Hanchao Wang, Qiying Wang

Research Collection School Of Economics

Limit theory involving stochastic integrals is now widespread in time series econometrics and relies on a few key results on functional weak convergence. In establishing such convergence, the literature commonly uses martingale and semimartingale structures. While these structures have wide relevance, many applications involve a cointegration framework where endogeneity and nonlinearity play major roles and complicate the limit theory. This paper explores weak convergence limit theory to stochastic integral functionals in such settings. We use a novel decomposition of sample covariances of functions of I (1) and I (0) time series that simplifies the asymptotics and our limit results for …


Estimating The Volatility Occupation Time Via Regularized Laplace Inversion, Jia Li, Viktor Todorov, Tauchen Oct 2016

Estimating The Volatility Occupation Time Via Regularized Laplace Inversion, Jia Li, Viktor Todorov, Tauchen

Research Collection School Of Economics

We propose a consistent functional estimator for the occupation time of the spot variance of an asset price observed at discrete times on a finite interval with the mesh of the observation grid shrinking to zero. The asset price is modeled nonparametrically as a continuous-time Itô semimartingale with nonvanishing diffusion coefficient. The estimation procedure contains two steps. In the first step we estimate the Laplace transform of the volatility occupation time and, in the second step, we conduct a regularized Laplace inversion. Monte Carlo evidence suggests that the proposed estimator has good small-sample performance and in particular it is far …