Machine Learning Panel Data Regressions with Heavy-tailed Dependent Data: Theory and Application

51 Pages Posted: 24 Sep 2020 Last revised: 23 Nov 2021

See all articles by Andrii Babii

Andrii Babii

University of North Carolina at Chapel Hill

Ryan T. Ball

The Stephen M. Ross School of Business at the University of Michigan

Eric Ghysels

University of North Carolina Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Department of Economics

Jonas Striaukas

Louvain Finance; UC Louvain and F.R.S.-FNRS

Date Written: August 6, 2020

Abstract

The paper introduces structured machine learning regressions for heavy-tailed dependent panel data potentially sampled at different frequencies. We focus on the sparse-group LASSO regularization. This type of regularization can take advantage of the mixed frequency time series panel data structures and improve the quality of the estimates. We obtain oracle inequalities for the pooled and fixed effects sparse-group LASSO panel data estimators recognizing that financial and economic data can have fat tails. To that end, we leverage on a new Fuk-Nagaev concentration inequality for panel data consisting of heavy-tailed $\tau$-mixing processes.

Keywords: high-dimensional panels, large N and T panels, mixed-frequency data, sparse-group LASSO, fat tails

JEL Classification: C22, C51, C52, C53, C55, C58, G17

Suggested Citation

Babii, Andrii and Ball, Ryan T. and Ghysels, Eric and Striaukas, Jonas and Striaukas, Jonas, Machine Learning Panel Data Regressions with Heavy-tailed Dependent Data: Theory and Application (August 6, 2020). Available at SSRN: https://ssrn.com/abstract=3670847 or http://dx.doi.org/10.2139/ssrn.3670847

Andrii Babii (Contact Author)

University of North Carolina at Chapel Hill ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27514
United States

Ryan T. Ball

The Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Eric Ghysels

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall, CB 3305
Chapel Hill, NC 27599
United States
919-966-5325 (Phone)
919-966-4986 (Fax)

HOME PAGE: http://https://eghysels.web.unc.edu/

Jonas Striaukas

Louvain Finance ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+3210479429 (Phone)
+3210479429 (Fax)

UC Louvain and F.R.S.-FNRS ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve
Louvain la Neuve, 1348
Belgium

HOME PAGE: http://sites.google.com/site/striaukasj/

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