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Nonparametric lag selection for time series

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  • Tschernig, Rolf
  • Yang, Lijian

Abstract

A nonparametric version of the Final Prediction Error (FPE) is proposed for lag selection in nonlinear autoregressive time series. We derive its consistency for both local constant and local linear estimators using a derived optimal bandwidth. Further asymptotic analysis suggests a greater probability of overfitting (too many lags) than underfitting (missing important lags). Thus a correction factor is proposed to increase correct fitting by reducing overfitting. Our Monte-Carlo study also corroborates that the correction factor generally improves the probability of correct lag selection for both linear and nonlinear processes. The proposed methods are successfully applied to the Canadian lynx data and daily returns of DM/US-Dollar exchange rates.

Suggested Citation

  • Tschernig, Rolf & Yang, Lijian, 1997. "Nonparametric lag selection for time series," SFB 373 Discussion Papers 1997,59, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  • Handle: RePEc:zbw:sfb373:199759
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    References listed on IDEAS

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    1. Lijian Yang & Wolfgang Hardle & Jens Nielsen, 1999. "Nonparametric Autoregression with Multiplicative Volatility and Additive mean," Journal of Time Series Analysis, Wiley Blackwell, vol. 20(5), pages 579-604, September.
    2. Hirotugu Akaike, 1969. "Fitting autoregressive models for prediction," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 21(1), pages 243-247, December.
    3. Härdle, Wolfgang & Tsybakov, A. & Yang, L., 1996. "Nonparametric Vector Autoregression," SFB 373 Discussion Papers 1996,61, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    4. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    1. Lijian Yang & Wolfgang Hardle & Jens Nielsen, 1999. "Nonparametric Autoregression with Multiplicative Volatility and Additive mean," Journal of Time Series Analysis, Wiley Blackwell, vol. 20(5), pages 579-604, September.
    2. Chikhi, Mohamed & Terraza, Michel, 2002. "Un essai de prévision non paramétrique de l'action France Télécom [A nonparametric prediction test of the France Telecom stock proces]," MPRA Paper 77268, University Library of Munich, Germany, revised Dec 2003.
    3. Tschernig, Rolf & Yang, Lijian, 2000. "Nonparametric estimation of generalized impulse response function," SFB 373 Discussion Papers 2000,89, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    4. Wolfgang Härdle & Torsten Kleinow & Rolf Tschernig, 2001. "Web Quantlets for Time Series Analysis," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 53(1), pages 179-188, March.
    5. Mohamed Chikhi & Claude Diebolt, 2010. "Nonparametric analysis of financial time series by the Kernel methodology," Quality & Quantity: International Journal of Methodology, Springer, vol. 44(5), pages 865-880, August.
    6. Diks Cees & Manzan Sebastiano, 2002. "Tests for Serial Independence and Linearity Based on Correlation Integrals," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(2), pages 1-22, July.
    7. Stanislav Anatolyev, 2007. "Optimal Instruments In Time Series: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 143-173, February.
    8. Lütkepohl,Helmut & Krätzig,Markus (ed.), 2004. "Applied Time Series Econometrics," Cambridge Books, Cambridge University Press, number 9780521547871.
    9. Gao, Jiti, 2007. "Nonlinear time series: semiparametric and nonparametric methods," MPRA Paper 39563, University Library of Munich, Germany, revised 01 Sep 2007.
    10. Timo Teräsvirta & Marcelo C. Medeiros & Gianluigi Rech, 2006. "Building neural network models for time series: a statistical approach," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 25(1), pages 49-75.
    11. CHIKHI, Mohamed, 2017. "Chocs exogènes et non linéarités dans les séries boursières: Application à la modélisation non paramétrique du cours de l'action Orange [Exogenous Shocks and nonlinearity in the stock exchange seri," MPRA Paper 76691, University Library of Munich, Germany, revised 2017.
    12. Cai, Zongwu, 2003. "Trending Time-Varying Coefficient Models With Serially Correlated Errors," SFB 373 Discussion Papers 2003,7, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    13. Bruno, Giancarlo, 2008. "Forecasting Using Functional Coefficients Autoregressive Models," MPRA Paper 42335, University Library of Munich, Germany.
    14. Manzan, S., 2002. "Model Selection for Nonlinear Time Series," CeNDEF Working Papers 02-12, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    15. Cees Diks & Sebastiano Manzan, 2001. "Tests for Serial Independence and Linearity based on Correlation Integrals," Tinbergen Institute Discussion Papers 01-085/1, Tinbergen Institute.
    16. Nikolay Robinzonov & Gerhard Tutz & Torsten Hothorn, 2012. "Boosting techniques for nonlinear time series models," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 96(1), pages 99-122, January.
    17. Rech, Gianluigi & Teräsvirta, Timo & Tschernig, Rolf, 1999. "A simple variable selection technique for nonlinear models," SFB 373 Discussion Papers 1999,26, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    18. Guo, Zheng-Feng & Shintani, Mototsugu, 2011. "Nonparametric lag selection for nonlinear additive autoregressive models," Economics Letters, Elsevier, vol. 111(2), pages 131-134, May.
    19. Yang, Lijian & Tschernig, Rolf, 1997. "Multivariate plug-in bandwidth for local linear regression," SFB 373 Discussion Papers 1997,99, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.

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