Publication Type

Journal Article

Version

submittedVersion

Publication Date

4-2021

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.

Keywords

Anti-persistent, Unit root, Mildly explosive, Limit theory, Bubble, Fractional integration, Young integral

Discipline

Econometrics

Research Areas

Econometrics

Publication

Oxford Bulletin of Economics and Statistics

Volume

83

Issue

2

First Page

518

Last Page

539

ISSN

0305-9049

Identifier

10.1111/obes.12395

Publisher

Wiley

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1111/obes.12395

Included in

Econometrics Commons

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