Adaptive LASSO estimation for ARDL models with GARCH innovations |
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Authors: | Marcelo C Medeiros Eduardo F Mendes |
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Institution: | 1. Department of Economics, Pontifical Catholic University of Rio de Janeiro, Rio de Janeiro, Brazilmcm@econ.puc-rio.br;3. School of Applied Mathematics, Funda??o Getulio Vargas, Rio de Janeiro, Brazil |
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Abstract: | ABSTRACTIn this paper, we show the validity of the adaptive least absolute shrinkage and selection operator (LASSO) procedure in estimating stationary autoregressive distributed lag(p,q) models with innovations in a broad class of conditionally heteroskedastic models. We show that the adaptive LASSO selects the relevant variables with probability converging to one and that the estimator is oracle efficient, meaning that its distribution converges to the same distribution of the oracle-assisted least squares, i.e., the least square estimator calculated as if we knew the set of relevant variables beforehand. Finally, we show that the LASSO estimator can be used to construct the initial weights. The performance of the method in finite samples is illustrated using Monte Carlo simulation. |
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Keywords: | adaLASSO ARDL GARCH LASSO shrinkage sparse models time series |
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