Publication Type
Working Paper
Version
publishedVersion
Publication Date
2-2020
Abstract
Based on the least squares estimator, this paper proposes a novel method to test the sign of the persistence parameter in a panel fractional Ornstein-Uhlenbeck process with a known Hurst parameter H. Depending on H ∈ (1/2, 1), H = 1/2, or H ∈ (0, 1/2), three test statistics are considered. In the null hypothesis the persistence parameter is zero. Based on a panel of continuous record of observations, the null asymptotic distributions are obtained when T is fixed and N is assumed to go to infinity, where T is the time span of the sample and N is the number of cross sections. The power function of the tests is obtained under the local alternative where the persistence parameter is close to zero in the order of 1/(T√N). The local power of the proposed test statistics is computed and compared with that of the maximum-likelihood-based test. The hypothesis testing problem and the local power function are also considered when a panel of discrete-sampled observations is available under a sequential limit.
Keywords
Panel fractional Ornstein-Uhlenbeck process, Least squares, Asymptotic distribution, Local alternative, Local power
Discipline
Econometrics
Research Areas
Econometrics
First Page
1
Last Page
28
Publisher
SMU Economics and Statistics Working Paper Series, Paper No. 6-2020
City or Country
Singapore
Citation
TANAKA, Katsuto; XIAO, Weilin; and Jun YU.
Local powers of least-squares-based test for panel fractional Ornstein-Uhlenbeck process. (2020). 1-28.
Available at: https://ink.library.smu.edu.sg/soe_research/2358
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.