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Asymptotic and Bootstrap Inference for AR(∞) Processes with Conditional Heteroskedasticity

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  • Silvia Goncalves
  • Lutz Kilian

Abstract

The main contribution of this paper is a proof of the asymptotic validity of the application of the bootstrap to AR(∞) processes with unmodelled conditional heteroskedasticity. We first derive the asymptotic properties of the least-squares estimator of the autoregressive sieve parameters when the data are generated by a stationary linear process with martingale difference errors that are possibly subject to conditional heteroskedasticity of unknown form. These results are then used in establishing that a suitably constructed bootstrap estimator will have the same limit distribution as the least-squares estimator. Our results provide theoretical justification for the use of either the conventional asymptotic approximation based on robust standard errors or the bootstrap approximation of the distribution of autoregressive parameters. A simulation study suggests that the bootstrap approach tends to be more accurate in small samples.

Suggested Citation

  • Silvia Goncalves & Lutz Kilian, 2007. "Asymptotic and Bootstrap Inference for AR(∞) Processes with Conditional Heteroskedasticity," Econometric Reviews, Taylor & Francis Journals, vol. 26(6), pages 609-641.
  • Handle: RePEc:taf:emetrv:v:26:y:2007:i:6:p:609-641
    DOI: 10.1080/07474930701624462
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    Keywords

    Autoregression; Bootstrap; GARCH;

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