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help for lomodrs                 (SSC distribution 26 Jun 2006)
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Lo Modified R/S test for long range dependence in timeseries

        lomodrs varname [if exp] [in range] [, maxlag(#)]

    lomodrs is for use with time-series data.  You must tsset your data before
    using lomodrs; see help tsset.  lomodrs supports the by prefix, which may
    be used to operate on each time series in a panel. Alternatively, the if
    qualifier may be used to specify a single time series in a panel.

    varname may contain time-series operators; help varlist.

Description

    lomodrs performs Lo's (1991) modified rescaled range (R/S, "range over
    standard deviation") test for long range dependence of a time series.  The
    classical R/S test, devised by Hurst (1951) and Mandelbrot (1972), is shown
    to be excessively sensitive to "short-range dependence" (e.g.  ARMA
    components). Lo's modified version of the statistic takes account of
    short-range dependence by performing a Newey-West correction (using a
    Bartlett window) to derive a consistent estimate of the long-range variance
    of the timeseries.

    Inference from the modified R/S test for long range dependence is
    complementary to that derived from that of other tests for long memory, or
    fractional integration in a timeseries, such as kpss, gphudak, modlpr and
    roblpr.

    The maximum lag order for the test is by default calculated from the sample
    size and the first-order autocorrelation coefficient of the varname using
    the data-dependent rule of Andrews (1991), assuming that the dgp is AR(1).
    The maximum lag order may be specified with the maxlag option.  If it is
    set to zero, the test performed is the classical Hurst-Mandelbrot
    rescaled-range statistic.

    Critical values for the test are taken from Lo, 1991, Table II.

    The test statistic and number of observations are placed in the return
    array.

Options

    maxlag(#) specifies the maximum lag order to be used in calculating the
    test. If omitted, the maximum lag order is calculated as described above.

Examples


    . use http://fmwww.bc.edu/ec-p/data/Mills2d/sp500a.dta

    . lomodrs sp500ar
        
    . lomodrs sp500ar, max(0)
        
    . lomodrs sp500ar if tin(1946,)

Authors

    Christopher F. Baum, Boston College, USA
    baum@bc.edu

    Tairi Room, Boston College, USA

References

Andrews, D. Heteroskedasticity and Autocorrelation Consistent Covariance Matrix
Estimation. Econometrica, 59, 1991, 817-858.

Hurst, H. Long Term Storage Capacity of Reservoirs. Transactions of the
American Society of Civil Engineers, 116, 1951, 770-799.

Lo, Andrew W. Long-Term Memory in Stock Market Prices. Econometrica, 59, 1991,
1279-1313.

Mandelbrot, B. Statistical Methodology for Non-Periodic Cycles: From the
Covariance to R/S Analysis. Annals of Economic and Social Measurement, 1, 1972,
259-290.


Also see

    On-line: regress, time, tsset, ac, corrgram; gphudak (if installed), modlpr
             (if installed), kpss (if installed)