Long Memory, Fractional Integration, and Cross-Sectional Aggregation
Published in Journal of Econometrics, 2017
Recommended citation: Haldrup, N., and Vera-Valdés, J.E. (2017). "Long Memory, Fractional Integration, and Cross-Sectional Aggregation." Journal of Econometrics. 199(1). https://vbn.aau.dk/en/publications/long-memory-fractional-integration-and-cross-sectional-aggregatio
In this paper we demonstrate that the aggregation argument is consistent with a range of different long memory definitions. Moreover, we show that ARFIMA modeling is invalid when the long memory is caused by aggregation. It is shown that standard methods for estimating and selecting ARFIMA specifications fail in properly fitting the dynamics of the series.