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A Generalised Fractional Differencing Bootstrap for Long Memory Processes

Kapetanios, George and Papailias, Fotis and Taylor, AM Robert (2019) 'A Generalised Fractional Differencing Bootstrap for Long Memory Processes.' Journal of Time Series Analysis, 40 (4). 467 - 492. ISSN 0143-9782

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Abstract

A bootstrap methodology, first proposed in a restricted form by Kapetanios and Papailias (2011), suitable for use with stationary and nonstationary fractionally integrated time series is further developed in this paper. The resampling algorithm involves estimating the degree of fractional integration, applying the fractional differencing operator, resampling the resulting approximation to the underlying short memory series and, finally, cumulating to obtain a resample of the original fractionally integrated process. While a similar approach based on differencing has been independently proposed in the literature for stationary fractionally integrated processes using the sieve bootstrap by Poskitt, Grose and Martin (2015), we extend it to allow for general bootstrap schemes including blockwise bootstraps. Further, we show that it can also be validly used for nonstationary fractionally integrated processes. We establish asymptotic validity results for the general method and provide simulation evidence which highlights a number of favourable aspects of its finite sample performance, relative to other commonly used bootstrap methods.

Item Type: Article
Uncontrolled Keywords: Fractional Differencing Bootstrap, Fractional Integration, Resampling
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 25 Feb 2019 12:32
Last Modified: 25 Jun 2019 12:15
URI: http://repository.essex.ac.uk/id/eprint/24122

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