We study a functional version of fractionally integrated time series, covering the functional unit root as a special case.
The functional time series are projected onto a finite number of sub-spaces, the level of nonstationarity allowed to vary over them. Under regularity conditions, we derive a weak convergence result for the projection of the fractionally integrated functional process onto the asymptotically dominant sub-space, which retains most of the sample information carried by the original functional time series. Through the classic functional principal component analysis of the sample variance operator, we obtain the eigenvalues and eigenfunctions which span a sample version of the dominant sub-space. Furthermore, we introduce a simple ratio criterion to consistently estimate the dimension of the dominant sub-space, and use a semiparametric local Whittle method to estimate the memory parameter. Monte-Carlo simulation studies and empirical applications are given to examine the finite-sample performance of the developed techniques. This is a joint work with P. M. Robinson and H. Shang.
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Secretariat Econometrics
Phone: +31 (0)10 408 12 59/ 12 64
Email: eb-secr@ese.eur.nl