Semiparametric Localized Bandwidth Selection in Kernel Density Estimation

45 Pages Posted: 12 May 2014

See all articles by Tingting Cheng

Tingting Cheng

Monash University

Jiti Gao

Monash University - Department of Econometrics & Business Statistics

Xibin Zhang

Monash University

Date Written: May 10, 2014

Abstract

Since conventional cross-validation bandwidth selection methods don't work for the case where the data considered are dependent time series, alternative bandwidth selection methods are needed. In recent years, Bayesian based global bandwidth selection methods have been proposed. Our experience shows that the use of a global bandwidth is however less suitable than using a localized bandwidth in kernel density estimation in the case where the data are dependent time series as discussed in an empirical application of this paper. Nonetheless, a difficult issue is how we can consistently estimate a localized bandwidth. In this paper, we propose a semiparametric estimation method, for which we establish an asymptotic theory for the proposed semiparametric estimator. A by-product of this bandwidth estimate is a new sampling-based likelihood approach to hyperparameter estimation. Monte Carlo simulation studies show that the proposed hyperparameter estimation method works very well, and that the proposed bandwidth estimator outperforms its competitors. Applications of the new bandwidth estimator to the kernel density estimation of Eurodollar deposit rate, as well as the S&P 500 daily return under conditional heteroscedasticity, demonstrate the effectiveness and competitiveness of the proposed semiparametric localized bandwidth.

Keywords: hyperparameter estimation; likelihood score; localized bandwidth

JEL Classification: C13, C14, C21

Suggested Citation

Cheng, Tingting and Gao, Jiti and Zhang, Xibin, Semiparametric Localized Bandwidth Selection in Kernel Density Estimation (May 10, 2014). Available at SSRN: https://ssrn.com/abstract=2435478 or http://dx.doi.org/10.2139/ssrn.2435478

Tingting Cheng

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Jiti Gao (Contact Author)

Monash University - Department of Econometrics & Business Statistics ( email )

900 Dandenong Road
Caulfield East, Victoria 3145
Australia
61399031675 (Phone)
61399032007 (Fax)

HOME PAGE: http://www.jitigao.com

Xibin Zhang

Monash University ( email )

900 Dandenong Road
Caulfield East, Victoria
Australia
61-3-99032130 (Phone)
61-3-99032007 (Fax)

HOME PAGE: http://users.monash.edu.au/~xzhang/

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
92
Abstract Views
762
Rank
506,051
PlumX Metrics