COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1026

"Approximately Median-Unbiased Estimation of Autoregressive Models
with Applications to U.S. Macroeconomic and Financial Time Series"

Donald W. K. Andrews and Hong-Yuan Chen

August 1992

This paper introduces approximately median-unbiased estimators for univariate AR(p) models with time trends. Confidence intervals also are considered. The methods are applied to the Nelson–Plosser macroeconomic data series, the extended Nelson–Plosser macroeconomic data series, and some annual stock dividend and price series. The results show that most of the series exhibit substantially greater persistence than least squares estimates and some Bayesian estimates suggest. For example, for the extended Nelson–Plosser data set, eight of the fourteen series are estimated to have a unit root, while six are estimated to be trend stationary. In contrast, the least squares estimates indicate trend stationarity for all of the series.