Additional sources of bias in half-life estimation

  • Authors:

  • Byeongchan Seong;A. K. M. Mahbub Morshed;Sung K. Ahn

  • Affiliations:

  • Department of Management and Operations, Washington State University, Pullman, WA 99164, USA;Department of Economics, Mail Code 4515, Southern Illinois University, Carbondale, IL 62901, USA;Department of Management and Operations, Washington State University, Pullman, WA 99164, USA

  • Venue:
  • Computational Statistics & Data Analysis
  • Year:
  • 2006

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Abstract

Recently, an increasing amount of attention is being paid to biases in the measurement of time series dynamics based on calculations of half-life. In particular, this issue amplifies the controversy surrounding the purchasing power parity doctrine. Cross-sectional and temporal aggregations, along with mis-specified models, were previously identified as sources of this bias. We identified several other sources of bias, namely, sampling error, incorrect approximations, and structural breaks in time series. These sources should also receive sufficient attention for a sound measurement of half-life.