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help for ^fracdiff^
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Generate fractionally-differenced timeseries
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^fracdiff^ varname [^if^ exp] [^in^ range] D[real] [, ^GEN^erate(varname)]
^fracdiff^ is for use with time-series data. You must ^tsset^ your data before
using ^fracdiff^; see help @tsset@. ^fracdiff^ 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.
Description
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^fracdiff^ computes a fractionally-differenced timeseries, given a value
of the fractional integration (long memory) parameter ^d^. If a series
exhibits long memory, it is neither stationary (I[0]) nor is it a unit
root (I{1}) process; it is an I(d) process, with d a real number.
An excellent survey of long memory models--which originated in
hydrology, and have been widely applied in economics and finance--
is given by Baillie (1996).
Once one of several available estimators has been used to determine the
^d^ value for a timeseries, ^fracdiff^ may be used to generate the
fractionally integrated transformation of the original series. Since
this transformation involves applying an infinite-order lag distribution
to the original series, the first twelve observations of the original
series are used to provide starting values. ^fracdiff^ requires that there
are no gaps, or missing values, within the specified sample. The resulting
series will be named ^fracdiff^ by default, if that series name is not
in use. The name of the new series may be specified with the ^generate^
option.
We illustrate ^fracdiff^ by using the GPH estimator (Geweke and Porter-
Hudak, 1983) to estimate the fractional differencing parameter for a
timeseries. The ^gphudak^ routine saves its point estimate of ^d^ in
^r(gph)^, which is then provided to the ^fracdiff^ routine.
Examples
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. ^use http://fmwww.bc.edu/ec-p/data/Mills2d/fta.dta^
. ^gphudak ftap^
. ^fracdiff ftap,d(`r(gph)') gen(lmftap)^
References
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Baillie, R., Long Memory Processes and Fractional Integration in
Econometrics, Journal of Econometrics, 73, 1996, 5-59.
Geweke, J. and Porter-Hudak, S., The Estimation and Application
of Long Memory Time Series Models, J. of Time Series Analysis,
1983, 221-238.
Author
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Christopher F Baum, Boston College, USA
baum@@bc.edu
Also see
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On-line: help for @tsset@, @gphudak@ (if installed), @modlpr@ (if installed),
@roblpr@ (if installed), @lomodrs@ (if installed)