Cyclical Long Memory: Decoupling, Modulation, and Modeling

Abstract

A new model for general cyclical long memory is introduced, by means of random modulation of certain bivariate long memory time series. This construction essentially decouples the two key features of cyclical long memory: quasi-periodicity and long-term persistence. It further allows for a general cyclical phase in cyclical long memory time series. Several choices for suitable bivariate long memory series are discussed, including a parametric fractionally integrated vector ARMA model. The parametric models introduced in this work have explicit autocovariance functions that can be used readily in simulation, estimation, and other tasks.