Judgment can spur long-memory

We arrive at this conclusion by using a new family of models — the Long Memory Judgmental Protocol (LMJP) — where robust filtering and fractionally integrated autoregressions are combined in an environment characterized by several players — namely, Forecast Producer, Forecast User and Reality. Our simulated and empirical evidence reveals that (i) knowledge of the LM parameter matters for the p-values of tests for spurious long memory; (ii) secondly that the role of LM in belief formation is ambiguous.