Adaptive estimation of vector autoregressive models with time-varying variance: application to testing linear causality in mean

DOI10.1016/J.JSPI.2012.04.005zbMATH Open1335.62140arXiv1007.1193OpenAlexW1982581735WikidataQ130543000 ScholiaQ130543000MaRDI QIDQ452998FDOQ452998

Authors: Hamdi Raïssi, Valentin Patilea 

Publication date: 18 September 2012

Published in: Journal of Statistical Planning and Inference (Search for Journal in Brave)

Abstract: Linear Vector AutoRegressive (VAR) models where the innovations could be unconditionally heteroscedastic and serially dependent are considered. The volatility structure is deterministic and quite general, including breaks or trending variances as special cases. In this framework we propose Ordinary Least Squares (OLS), Generalized Least Squares (GLS) and Adaptive Least Squares (ALS) procedures. The GLS estimator requires the knowledge of the time-varying variance structure while in the ALS approach the unknown variance is estimated by kernel smoothing with the outer product of the OLS residuals vectors. Different bandwidths for the different cells of the time-varying variance matrix are also allowed. We derive the asymptotic distribution of the proposed estimators for the VAR model coefficients and compare their properties. In particular we show that the ALS estimator is asymptotically equivalent to the infeasible GLS estimator. This asymptotic equivalence is obtained uniformly with respect to the bandwidth(s) in a given range and hence justifies data-driven bandwidth rules. Using these results we build Wald tests for the linear Granger causality in mean which are adapted to VAR processes driven by errors with a non stationary volatility. It is also shown that the commonly used standard Wald test for the linear Granger causality in mean is potentially unreliable in our framework. Monte Carlo experiments illustrate the use of the different estimation approaches for the analysis of VAR models with stable innovations.

Full work available at URL: https://arxiv.org/abs/1007.1193

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zbMATH Keywords

kernel smoothingordinary least squaresadaptive least squaresBahadur relative efficiencyheteroscedastic errorslinear causality in meanVAR model

Mathematics Subject Classification ID

Nonparametric estimation (62G05) Nonparametric hypothesis testing (62G10) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10)

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Cited In (12)

• On the correlation analysis of stocks with zero returns
• Adaptive Inference in Heteroscedastic Fractional Time Series Models
• Level shift estimation in the presence of non-stationary volatility with an application to the unit root testing problem
• Autoregressive Order Identification for VAR Models with Non Constant Variance
• Asymptotic inference of the ARMA model with time-functional variance noises
• Adaptive Testing for Cointegration With Nonstationary Volatility
• Testing and Modelling for the Structural Change in Covariance Matrix Time Series With Multiplicative Form
• Adaptive information-based methods for determining the co-integration rank in heteroskedastic VAR models
• Testing Second-Order Dynamics for Autoregressive Processes in Presence of Time-Varying Variance
• Asymptotic Inference in the Random Coefficient Autoregressive Model with Time-functional Variance Noises
• ADAPTIVE LONG MEMORY TESTING UNDER HETEROSKEDASTICITY
• Estimation of the variance function in structural break autoregressive models with non‐stationary and explosive segments

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