Indirect estimation methods are proposed for estimating ARFIMA, as well as
more complex VARFIMA models. A general framework for conducting indirect es
timation of fractional models is developed that covers simulation methods,
choice of auxiliary model and estimation algorithm. Special attention is gi
ven to comparing the finite sampling properties of the indirect estimator w
ith Sowell's (1992a) exact time domain maximum-likelihood estimator, the sp
ectral maximum-likelihood estimator of Fox and Taqqu (1986) and the Geweke
and Porter-Hudak (1983) spectral regression estimator. The indirect estimat
or can be computationally faster than the exact time domain maximum-likelih
ood estimator while generating similar small sample properties. The computa
tional gains of the indirect estimator over maximum likelihood increase as
the complexity of the data generating process increases. (C) 1999 Elsevier
Science S.A. All rights reserved. JEL classification: C13; C22.