Shrinkage Estimation of Semiparametric Multiplicative Error Models

29 Pages Posted: 28 Jan 2009

See all articles by Christian T. Brownlees

Christian T. Brownlees

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics (Barcelona GSE)

Giampiero M. Gallo

Corte dei Conti - Italian Court of Audits; University of Bologna - Rimini Center for Economic Analysis (RCEA); Universita' di Firenze - Dipartimento di Statistica, Informatica, Applicazioni "G.Parenti"

Date Written: September 27, 2008

Abstract

Within models for nonnegative time series, it is common to encounter deterministic components (trends, seasonalities) which can be specified in a flexible form. This work proposes the use of shrinkage type estimation for the parameters of such components. The amount of smoothing to be imposed on the estimates can be chosen using different methodologies: Cross-Validation for dependent data and the recently proposed Focused Information Criterion. We illustrate such a methodology using a simple semiparametric autoregressive conditional duration model that decomposes the conditional expectations of durations into dynamic (parametric) and diurnal (flexible) components. We use a shrinkage estimator that jointly estimates the parameters of the two components and controls the smoothness of the estimated flexible component. The results show that from a forecasting perspective such a procedure outperforms other estimation procedures.

Suggested Citation

Brownlees, Christian T. and Gallo, Giampiero M., Shrinkage Estimation of Semiparametric Multiplicative Error Models (September 27, 2008). Available at SSRN: https://ssrn.com/abstract=1333865 or http://dx.doi.org/10.2139/ssrn.1333865

Christian T. Brownlees

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

HOME PAGE: http://84.89.132.1/~cbrownlees/

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas 25-27
Barcelona, Catalonia 08014
Spain

Giampiero M. Gallo (Contact Author)

Corte dei Conti - Italian Court of Audits ( email )

viale Mazzini
Roma, Roma 00195
Italy

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Universita' di Firenze - Dipartimento di Statistica, Informatica, Applicazioni "G.Parenti" ( email )

Viale G.B. Morgagni, 59
Florence, 50134
Italy
0039 055 2751 591 (Phone)
0039 055 4223560 (Fax)

HOME PAGE: http://www.disia.unifi.it/gallog

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
119
Abstract Views
966
rank
263,639
PlumX Metrics