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Fractional Integration (fractional + integration)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	75%

Selected Abstracts

Fractional integration in agricultural futures price volatilities revisited

AGRICULTURAL ECONOMICS, Issue 1 2009
Peter S. Sephton
Conditional volatility; Fractional integration; Long-memory Abstract Jin and Frechette (2004) examined the degree to which agricultural price volatilities exhibited evidence of fractional integration and concluded it was important to consider both long-run and short-run memory when modeling conditional variances. The purpose of this note is to revisit the issue using new methods and techniques which generally reaffirm the view that return volatilities are fractionally integrated and conditionally heteroskedastic, with many exhibiting significant leverage effects, a result not previously reported. [source]

Trade Balance and Exchange Rate: Unit Roots, Co-integration and Long Memory in the US and the UK

ECONOMIC NOTES, Issue 1 2008
Luis A. Gil-Alana
This paper deals with the relationship between the balance of trade and the exchange rate in the US/UK case. Many authors have studied this issue for many countries, but despite the intensive research, there is still no agreement about the effectiveness of currency devaluation to increase a country's balance of trade. We first analyse the relationship between the two variables using unit roots and co-integration methods, and the results are ambiguous. We try a new approach based on fractional integration. The unit root hypothesis is rejected in case of the trade balance in favour of smaller orders of integration, while this hypothesis is not rejected for the exchange rate. Thus, the two series do not possess the same order of integration. We sort this problem out by taking the exchange rate as an exogenous variable, and including it in a regression model where the residuals might follow a fractionally integrated model. [source]

Cyclical long-range dependence and the warming effect in a long temperature time series

INTERNATIONAL JOURNAL OF CLIMATOLOGY, Issue 11 2008
L. A. Gil-Alana
Abstract In this paper, we propose a new approach for modelling a long temperature time series, using fractional cyclical integration. This model is based on the observation that the estimated spectrum of the series (the average annual temperature in Central England, 1659,2001) has its highest value at a frequency which is not zero, thus suggesting the existence of cycles at other frequencies. The results based on a fractional cyclical model show that there is a significant warming effect throughout the sample of about 0.22 °C/century. However, if we concentrate exclusively on the data corresponding to the 20th century that value increases to 0.64%. Moreover, the results in the paper show that a fractionally cyclically integrated model can be a competing alternative to other approaches based on fractional integration at the zero frequency. Copyright © 2007 Royal Meteorological Society [source]

An application of fractional integration to a long temperature series

INTERNATIONAL JOURNAL OF CLIMATOLOGY, Issue 14 2003
L. A. Gil-Alana
Abstract Some recently proposed techniques of fractional integration are applied to a long UK temperature series. The tests are valid under general forms of serial correlation and do not require estimation of the fractional differencing parameter. The results show that central England temperatures have increased about 0.23 °C per 100 years in recent history. Attempting to summarize the conclusions for each of the months, we are left with the impression that the highest increase has occurred during the months from October to March. Copyright © 2003 Royal Meteorological Society [source]

Testing of seasonal fractional integration in UK and Japanese consumption and income

JOURNAL OF APPLIED ECONOMETRICS, Issue 2 2001
L. A. Gil-Alaña
The seasonal structure of quarterly UK and Japanese consumption and income is examined by means of fractionally based tests proposed by Robinson (1994). These series were analysed from an autoregressive unit root viewpoint by Hylleberg, Engle, Granger and Yoo (HEGY, 1990) and Hylleberg, Engle, Granger and Lee (HEGL, 1993). We find that seasonal fractional integration, with amplitudes possibly varying across frequencies, is an alternative plausible way of modelling these series. Copyright © 2001 John Wiley & Sons, Ltd. [source]

Bootstrapping Financial Time Series

JOURNAL OF ECONOMIC SURVEYS, Issue 3 2002
Esther Ruiz
It is well known that time series of returns are characterized by volatility clustering and excess kurtosis. Therefore, when modelling the dynamic behavior of returns, inference and prediction methods, based on independent and/or Gaussian observations may be inadequate. As bootstrap methods are not, in general, based on any particular assumption on the distribution of the data, they are well suited for the analysis of returns. This paper reviews the application of bootstrap procedures for inference and prediction of financial time series. In relation to inference, bootstrap techniques have been applied to obtain the sample distribution of statistics for testing, for example, autoregressive dynamics in the conditional mean and variance, unit roots in the mean, fractional integration in volatility and the predictive ability of technical trading rules. On the other hand, bootstrap procedures have been used to estimate the distribution of returns which is of interest, for example, for Value at Risk (VaR) models or for prediction purposes. Although the application of bootstrap techniques to the empirical analysis of financial time series is very broad, there are few analytical results on the statistical properties of these techniques when applied to heteroscedastic time series. Furthermore, there are quite a few papers where the bootstrap procedures used are not adequate. [source]

A fractionally integrated exponential model for UK unemployment

JOURNAL OF FORECASTING, Issue 5 2001
L.A. Gil-AlanaArticle first published online: 9 AUG 200
Abstract Fractionally integrated models with the disturbances following a Bloomfield (1973) exponential spectral model are proposed in this article for modelling UK unemployment. This gives us a better understanding of the low-frequency dynamics affecting the series without relying on any particular ARMA specification for its short-run components which, in general, require many more parameters to estimate. The results indicate that this exponential model, confounded with fractional integration, may be a feasible way of modelling unemployment. It also shows that its order of integration is much higher than one and thus leads to the conclusion that the standard practice of taking first differences may lead to erroneous results. Copyright © 2001 John Wiley & Sons, Ltd. [source]

Fractional integration in agricultural futures price volatilities revisited

A Semiparametric Analysis of the Term Structure of the US Interest Rates,

OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 4 2009
Fabrizio Iacone
Abstract The short end of the US$ term structure of interest rates is analysed allowing for the possibility of fractional integration and cointegration. This approach permits mean-reverting dynamics for the data and the existence of a common long run stochastic trend to be maintained simultaneously. We estimate the model for the period 1963,2006 and find it compatible with this structure. The restriction that the data are I(1) and the errors are I(0) is rejected, mainly because the latter still display long memory. This result is consistent with a model of monetary policy in which the Central Bank operates affecting contracts with short term maturity, and the impulses are transmitted to contracts with longer maturities and then to the final goals. However, the transmission of the impulses along the term structure cannot be modelled using the Expectations Hypothesis. [source]