In this paper, the concept of linear cointegration as introduced by Engle and Granger [5] is merged into the local paradigm. Adopting a local approach enables the achievement of a local error correction model characterised by dynamic parameters. Another important result obtained using the local paradigm is that the mechanism that leads the dynamic system back to a steady state is no longer a constant: it is a function not defined a priori but estimated point by point.

Nonlinear cointegration in financial time series

PIZZI, Claudio
2010-01-01

Abstract

In this paper, the concept of linear cointegration as introduced by Engle and Granger [5] is merged into the local paradigm. Adopting a local approach enables the achievement of a local error correction model characterised by dynamic parameters. Another important result obtained using the local paradigm is that the mechanism that leads the dynamic system back to a steady state is no longer a constant: it is a function not defined a priori but estimated point by point.
2010
Mathematical and Statistical Methods for Actuaria Sciences and Finance
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/28779
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