THEORY OF LOW FREQUENCY CONTAMINATION FROM NONSTATIONARITY AND MISSPECIFICATION: CONSEQUENCES FOR HAR INFERENCE
Perron, Pierre
We establish theoretical results about the low frequency contamination (i.e., long memory effects) induced by general nonstationarity for estimates such as the sample autocovariance and the periodogram, and deduce consequences for heteroskedasticity and autocorrelation robust (HAR) inference. We present explicit expressions for the asymptotic bias of these estimates. We show theoretically that nonparametric smoothing over time is robust to low frequency contamination. Nonstationarity can have co