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Penalized Adaptive Forecasting with Large Information Sets and Structural Changes

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  • Zbonakova, Lenka
  • Li, Xinjue
  • Härdle, Wolfgang Karl

Abstract

In the present paper we propose a new method, the Penalized Adaptive Method (PAM), for a data driven detection of structural changes in sparse linear models. The method is able to allocate the longest homogeneous intervals over the data sample and simultaneously choose the most proper variables with the help of penalized regression models. The method is simple yet exible and can be safely applied in high-dimensional cases with dierent sources of parameter changes. Comparing with the adaptive method in linear models, its combination with dimension reduction yields a method which properly selects signicant variables and detects structural breaks while steadily reduces the forecast error in high-dimensional data.

Suggested Citation

  • Zbonakova, Lenka & Li, Xinjue & Härdle, Wolfgang Karl, 2018. "Penalized Adaptive Forecasting with Large Information Sets and Structural Changes," IRTG 1792 Discussion Papers 2018-039, Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series".
    • Handle: RePEc:zbw:irtgdp:2018039
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    Cited by:

    1. Klochkov, Yegor & Härdle, Wolfgang Karl & Xu, Xiu, 2019. "Localizing Multivariate CAViaR," IRTG 1792 Discussion Papers 2019-007, Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series".

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    More about this item

    Keywords

    SCAD penalty; propagation-separation; adaptive window choice; multiplier bootstrap;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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