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Prediction in locally stationary time series

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  • Holger Dette
  • Weichi Wu

Abstract

We develop an estimator for the high-dimensional covariance matrix of a locally stationary process with a smoothly varying trend and use this statistic to derive consistent predictors in non-stationary time series. In contrast to the currently available methods for this problem the predictor developed here does not rely on fitting an autoregressive model and does not require a vanishing trend. The finite sample properties of the new methodology are illustrated by means of a simulation study and a financial indices study.

Suggested Citation

  • Holger Dette & Weichi Wu, 2020. "Prediction in locally stationary time series," Papers 2001.00419, arXiv.org, revised Jan 2020.
    • Handle: RePEc:arx:papers:2001.00419
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