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ADAPTIVE LONG MEMORY TESTING UNDER HETEROSKEDASTICITY

Published online by Cambridge University Press:  15 February 2016

David Harris  and
Hsein Kew
David Harris*
Affiliation:
Monash University
Hsein Kew
Affiliation:
Monash University
*
*Address correspondence to David Harris, Department of Econometrics and Business Statistics, Monash University, E-mail: david.harris3@monash.edu
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Abstract

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This paper considers adaptive hypothesis testing for the fractional differencing parameter in a parametric ARFIMA model with unconditional heteroskedasticity of unknown form. A weighted score test based on a nonparametric variance estimator is proposed and shown to be asymptotically equivalent, under the null and local alternatives, to the Neyman-Rao effective score test constructed under Gaussianity and known variance process. The proposed test is therefore asymptotically efficient under Gaussianity. The finite sample properties of the test are investigated in a Monte Carlo experiment and shown to provide potentially large power gains over the usual unweighted long memory test.

Type
MISCELLANEA
Information
Econometric Theory , Volume 33 , Issue 3 , June 2017 , pp. 755 - 778
Copyright
Copyright © Cambridge University Press 2016 

Footnotes

We are grateful to the co-editor and two referees for very helpful suggestions and comments that led to significant improvement on an earlier version of this paper. This research is supported by the Australian Research Council Discovery Grant DP1094010.

References

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