Publication Type

Journal Article

Publication Date

2-2011

Abstract

An error is corrected in Yu and Phillips (2001) (Econometrics Journal, 4, 210-224) where a time transformation was used to induce Gaussian disturbances in the discrete time equivalent model. It is shown that the error process in this model is not a martingale and the Dambis, Dubins-Schwarz (DDS) theorem is not directly applicable. However, a detrended error process is a martingale, the DDS theorem is applicable, and the corresponding stopping time correctly induces Gaussianity. We show that the two stopping time sequences differ by O(a2), where a is the pre-specified normalized timing constant.

Keywords

Nonlinear Diffusion, Normalizing Transformation, Level Effect, DDS Theorem.

Discipline

Econometrics | Economic Theory | Finance

Research Areas

Econometrics

Publication

Econometrics Journal

Volume

14

Issue

1

First Page

126

Last Page

129

ISSN

1368-4221

Identifier

10.1111/j.1368-423X.2010.00326.x

Publisher

Wiley

City or Country

Singapore

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1111/j.1368-423X.2010.00326.x

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