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LIKELIHOOD-BASED INFERENCE IN TRENDING TIME SERIES WITH A ROOT NEAR UNITY

Published online by Cambridge University Press:  01 December 2001

Zhijie Xiao
Affiliation:
University of Illinois at Urbana-Champaign
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Abstract

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This paper studies likelihood-based estimation and tests for autoregressive time series models with deterministic trends and general disturbance distributions. In particular, a joint estimation of the trend coefficients and the autoregressive parameter is considered. Asymptotic analysis on the M-estimators is provided. It is shown that the limiting distributions of these estimators involve nonlinear equation systems of Brownian motions even for the simple case of least squares regression. Unit root tests based on M-estimation are also considered, and extensions of the Neyman–Pearson test are studied. The finite sample performance of these estimators and testing procedures is examined by Monte Carlo experiments.

Information

Type
Research Article
Copyright
© 2001 Cambridge University Press