Adaptive LASSO estimation for ARDL models with GARCH innovations

Marcelo C. Medeiros, Eduardo F. Mendes

Research output: Contribution to journalArticlepeer-review

Abstract

In this paper, we show the validity of the adaptive least absolute shrinkage and selection operator (LASSO) procedure in estimating stationary autoregressive distributed lag(p,q) models with innovations in a broad class of conditionally heteroskedastic models. We show that the adaptive LASSO selects the relevant variables with probability converging to one and that the estimator is oracle efficient, meaning that its distribution converges to the same distribution of the oracle-assisted least squares, i.e., the least square estimator calculated as if we knew the set of relevant variables beforehand. Finally, we show that the LASSO estimator can be used to construct the initial weights. The performance of the method in finite samples is illustrated using Monte Carlo simulation.

Original languageEnglish (US)
Pages (from-to)622-637
Number of pages16
JournalEconometric Reviews
Volume36
Issue number6-9
DOIs
StatePublished - Oct 21 2017
Externally publishedYes

Keywords

  • adaLASSO
  • ARDL
  • GARCH
  • LASSO
  • shrinkage
  • sparse models
  • time series

ASJC Scopus subject areas

  • Economics and Econometrics

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