Local Whittle Analysis of Stationary Unbalanced Fractional Cointegration Systems

Start date

Thursday, 23 May 2019, 16:00

End date

Thursday, 23 May 2019, 17:00

Room
Polak 2-14
Building
Polak Building
Location
Campus Woudestein
Spoken Language
English

In this paper we propose a local Whittle estimator of stationary bivariate unbalanced fractional cointegration systems.

Unbalanced cointegration refers to the situation where the observables have different integration orders, but their filtered versions have equal integration orders and are cointegrated in the usual sense. Based on the frequency
domain representation of the unbalanced version of Phillips’ triangular system, we develop a semiparametric approach to jointly estimate the unbalance parameter, the long run coefficient, and the integration orders of the regressand and cointegrating errors.

The paper establishes the consistency and asymptotic normality of this estimator. We find a peculiar rate of convergence for the unbalance estimator (possibly faster than root-n) and a singular joint limiting distribution of the unbalance and long-run coefficients. Its good finite-sample properties are emphasized through Monte Carlo experiments. We illustrate the relevance of the developed estimator for financial data in an empirical application to the information flowing between the crude oil spot and CME-NYMEX markets.

Co-author: Gilles de Truchis and Florent Dubois

  • Elena is an associate professor, working broadly on financial econometrics, including forecasting, financial crisis related issues, volatility modelling, etc. She has published several papers in both finance and econometric journals. More information can be found at

    https://sites.google.com/site/ivonadumitrescu/home

More information

Coordinators: Andreas Alfons, alfons@ese.eur.nl and Wendun Wang, wang@ese.eur.nl

Contact: Anneke Kop, eb-secr@ese.eur.nl