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Statistica Sinica 16(2006), 15-28





QUANTILE INFERENCE FOR NEAR-INTEGRATED

AUTOREGRESSIVE TIME SERIES

WITH INFINITE VARIANCE


Ngai Hang Chan, Liang Peng and Yongcheng Qi


The Chinese University of Hong Kong, Georgia Institute of Technology
and University of Minnesota Duluth


Abstract: The limiting distribution of the quantile estimate for the autoregressive coefficient of a near-integrated first order autoregressive model with infinite variance errors is derived. Since the limiting distribution depends on the unknown density function of the errors, an empirical likelihood ratio statistic is proposed from which confidence intervals can be constructed for the near unit root model without knowing the density function. Numerical simulations are conducted to compare the performance of the empirical likelihood method and the least squares procedure. It is found that the empirical likelihood method outperforms the least squares procedure in general.



Key words and phrases: Empirical likelihood method, infinite variance, near unit root, quantile estimate.



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