Title: Spurious fractional cointegration
Authors: Philipp Sibbertsen - University of Hannover (Germany)
Christian Leschinski - Leibniz University Hannover (Germany) [presenting]
Abstract: For univariate time series it is well documented that low frequency contaminations generate spurious long memory. This analysis is extended to vector valued processes. We propose a rigorous definition of spurious fractional cointegration, we show that such a behavior will occur in processes with joint low frequency contaminations and standard estimation of the cointegrating rank can spuriously indicate fractional cointegration in these situations. To deal with multivariate low frequency contamination, we derive a robust multivariate local Whittle (RMLW) estimator for the memory parameters and the cointegrating vector that is consistent and asymptotically normal in the presence of low frequency contaminations and spurious fractional cointegration.