Mildly Explosive Autoregression with Anti‐persistent Errors

B-Tier
Journal: Oxford Bulletin of Economics and Statistics
Year: 2021
Volume: 83
Issue: 2
Pages: 518-539

Authors (3)

Yiu Lim Lui (not in RePEc) Weilin Xiao (not in RePEc) Jun Yu (University of Macau)

Score contribution per author:

0.670 = (α=2.01 / 3 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

An asymptotic distribution is derived for the least squares (LS) estimate of a first‐order autoregression with a mildly explosive root and anti‐persistent errors. While the sample moments depend on the Hurst parameter asymptotically, the Cauchy limiting distribution theory remains valid for the LS estimates in the model without intercept and a model with an asymptotically negligible intercept. Monte Carlo studies are designed to check the precision of the Cauchy distribution in finite samples. An empirical study based on the monthly NASDAQ index highlights the usefulness of the model and the new limiting distribution.

Technical Details

RePEc Handle
repec:bla:obuest:v:83:y:2021:i:2:p:518-539
Journal Field
General
Author Count
3
Added to Database
2026-01-29