Research Article Open Access

Nelson and Plosser Revisited: Evidence from Fractional ARIMA Models

Guglielmo Maria Caporale1 and Luis A. Gil-Alana1
  • 1 ,
American Journal of Applied Sciences
Volume 2 No. 4, 2005, 860-872

DOI: https://doi.org/10.3844/ajassp.2005.860.872

Submitted On: 9 April 2006 Published On: 30 April 2005

How to Cite: Caporale, G. M. & Gil-Alana, L. A. (2005). Nelson and Plosser Revisited: Evidence from Fractional ARIMA Models. American Journal of Applied Sciences, 2(4), 860-872. https://doi.org/10.3844/ajassp.2005.860.872

Abstract

In this study fractionally integrated ARIMA (ARFIMA) models are estimated using an extended version of Nelson and Plosser[1]’s data set. The analysis employs[11]’s maximum likelihood procedure. Such a parametric approach requires the model to be correctly specified in order for the estimates to be consistent. A model-selection procedure based on diagnostic tests on the residuals, together with several likelihood criteria, is adopted to determine the correct specification for each series. The results suggest that all series, except unemployment and bond yields, are integrated of order greater than one. Thus, the standard approach of taking first differences may result in stationary series with long memory behavior.

  • 1,092 Views
  • 1,734 Downloads
  • 1 Citations

Download

Keywords

  • Non stationarity
  • long memory
  • ARFIMA models