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Estimating Autocorrelations in the Presence of Deterministic Trends

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Published/Copyright: April 27, 2011
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Journal of Time Series Econometrics
From the journal Journal of Time Series Econometrics Volume 3 Issue 2

This paper considers the impact of ordinary least squares (OLS) detrending and the first difference (FD) detrending on autocorrelation estimation in the presence of long memory and deterministic trends. We show that the FD detrending results in inconsistent autocorrelation estimates when the error term is stationary. Thus, the FD detrending should not be employed for autocorrelation estimation of the detrended series when constructing e.g. portmanteau-type tests. In an empirical application of volume in Dow Jones stocks, we show that for some stocks, OLS and FD detrending result in substantial differences in ACF estimates.

Keywords: autocorrelations; OLS; first difference; long memory
Published Online: 2011-4-27

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

Articles in the same Issue

  1. Article
  2. Some New Results for Threshold AR(1) Models
  3. Detection of Additive Outliers in Seasonal Time Series
  4. Nonparametric Unit Root Test and Structural Breaks
  5. Estimating Autocorrelations in the Presence of Deterministic Trends
https://doi.org/10.2202/1941-1928.1022
Keywords for this article
autocorrelations; OLS; first difference; long memory

Articles in the same Issue

  1. Article
  2. Some New Results for Threshold AR(1) Models
  3. Detection of Additive Outliers in Seasonal Time Series
  4. Nonparametric Unit Root Test and Structural Breaks
  5. Estimating Autocorrelations in the Presence of Deterministic Trends
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