Lee, L., Linton, O., Whang, Y-J.

Quantilograms under Strong Dependence

CWPE1936

Abstract: We develop the limit theory of the quantilogram and cross-quantilogram under long memory. We establish the sub-root-n central limit theorems for quantilograms that depend on nuisance parameters. We propose a moving block bootstrap (MBB) procedure for inference and we establish its consistency thereby enabling a consistent confidence interval construction for the quantilograms. The newly developed reduction principles for the quantilograms serve as the main technical devices used to derive the asymptotics and establish the validity of MBB. We report some simulation evidence that our methods work satisfactorily. We apply our method to quantile predictive relations between financial returns and long-memory predictors.

Keywords: Long Memory, Moving Block Bootstrap, Nonlinear Dependence, Quantilogram and Cross-Quantilgoram, Reduction Principle

JEL Codes: C22

Author links: Oliver Linton  

PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1936.pdf

Open Access Link: https://doi.org/10.17863/CAM.38671

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