Title: Nonstationary fractionally integrated functional time series
Authors: Degui Li - University of York (United Kingdom)
Peter Robinson - London School of Economics (United Kingdom)
Han Lin Shang - Macquarie University (Australia) [presenting]
Abstract: A functional version of fractionally integrated time series is studied, which covers the functional unit root as a special case. The functional time series are projected onto a finite number of sub-spaces; the level of nonstationarity allowed to vary over them. Under regularity conditions, we derive a weak convergence result for the projection of the fractionally integrated functional process onto the asymptotically dominant sub-space, which retains most of the sample information carried by the original functional time series. Through the classic functional principal component analysis of the sample variance operator, we obtain the eigenvalues and eigenfunctions which span a sample version of the dominant sub-space. Furthermore, we introduce a simple ratio criterion to consistently estimate the dimension of the dominant sub-space and use a semiparametric local Whittle method to estimate the memory parameter. Monte-Carlo simulation studies and empirical applications are given to examine the finite-sample performance of the developed techniques.