Time-scale transformations of discrete time processes

This paper investigates the effects of temporal aggregation when the aggregation frequency is variable and possibly stochastic. The results that we report include, as a particular case, the well-known results on fixed-interval aggregation, such as when monthly data are aggregated into quarters. A variable aggregation frequency implies that the aggregated process will exhibit time-varying parameters and non-spherical disturbances, even when these characteristics are absent from the original model. Consequently, we develop methods for specification and estimation of the aggregate models and show with an example how these methods perform in practice. Copyright 2004 Blackwell Publishing Ltd.