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  • Prime meridian: consequences for modeling financial nonsynchronous time series


TERRA ECONOMICUS, , Vol. 16 (no. 3),

The prime meridian in Greenwich was chosen as an international prime at the International Meridian Conference in 1884. Since then, all the measurements concerning the economic and financial time series have been performed with orientation to that of Greenwich. Taking into account protocols of the conference proceedings, this paper shows that the subjective selection of the prime meridian location, like any choice of a person or a group of people, its seeming axiomatic and a priori character have made the prime meridian an absolute givenness for econometric models, an undisputable initial condition of time series econometrics. Using the mechanics of exogenous variables lags in the classical Granger test, it is possible to demonstrate that some shifts in the prime meridian location cause shifts in the observation borders of the non-synchronous time series data sets. This fact compels values of certain time series to transfer into the neighboring observations, which leads to forming different data sets where classical econometric models and tests will produce other solutions, different from those of Greenwich’s. The use of non-synchronous data, the models with the exogenous variables lags built on autoregression principles, may lead to multiple solutions dependent on the prime meridian location and the number of participating non-synchronous time series with the unique moments of record within a day, relative to prime meridian time. This proves the necessity to correctly consider the bias associated with the choice of a single prime meridian, at least in econometric calculations of non-synchronous time series. The present paper shows the necessity of comprehensive evaluation of the prime meridian bias, not necessarily the Greenwich one, influencing the econometrics of synchronous and non-synchronous time series; such evaluation may help develop the truly objective models irrespective of the prime meridian location or the starting point of time quanta.

Keywords: prime meridian; prime meridian bias; starting point bias; aximomatic; apriori, Granger causality; instantaneous causality; contemporaneous causality; exogenous; autoregression; data set; time series; nonsychronous; time quantum; time zone; time dimension; spatial

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606