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Maximum Likelihood Estimators for ARMA and ARFIMA Models. A Monte Carlo Study.

Hauser, Michael A. (1998) Maximum Likelihood Estimators for ARMA and ARFIMA Models. A Monte Carlo Study. Preprint Series / Department of Applied Statistics and Data Processing, 22. Department of Statistics and Mathematics, Abt. f. Angewandte Statistik u. Datenverarbeitung, WU Vienna University of Economics and Business, Vienna.

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Abstract

We analyze by simulation the properties of two time domain and two frequency domain estimators for low order autoregressive fractionally integrated moving average Gaussian models, ARFIMA (p,d,q). The estimators considered are the exact maximum likelihood for demeaned data, EML, the associated modified profile likelihood, MPL, and the Whittle estimator with, WLT, and without tapered data, WL. Length of the series is 100. The estimators are compared in terms of pile-up effect, mean square error, bias, and empirical confidence level. The tapered version of the Whittle likelihood turns out to be a reliable estimator for ARMA and ARFIMA models. Its small losses in performance in case of ``well-behaved" models are compensated sufficiently in more ``difficult" models. The modified profile likelihood is an alternative to the WLT but is computationally more demanding. It is either equivalent to the EML or more favorable than the EML. For fractionally integrated models, particularly, it dominates clearly the EML. The WL has serious deficiencies for large ranges of parameters, and so cannot be recommended in general. The EML, on the other hand, should only be used with care for fractionally integrated models due to its potential large negative bias of the fractional integration parameter. In general, one should proceed with caution for ARMA(1,1) models with almost canceling roots, and, in particular, in case of the EML and the MPL for inference in the vicinity of a moving average root of +1. (author's abstract)

Item Type: Paper
Keywords: fractional integration / whittle likelihood / modified profile likelihood / data taper / pile-up effect
Classification Codes: JEL C13, C22
Divisions: Departments > Finance, Accounting and Statistics > Statistics and Mathematics
Depositing User: Repository Administrator
Date Deposited: 10 Jul 2006 11:18
Last Modified: 27 Nov 2014 15:26
URI: http://epub.wu.ac.at/id/eprint/794

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