Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/25244 
Year of Publication: 
2008
Series/Report no.: 
SFB 649 Discussion Paper No. 2008,002
Publisher: 
Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk, Berlin
Abstract: 
This paper offers a new method for estimation and forecasting of the linear and nonlinear time series when the stationarity assumption is violated. Our general local parametric approach particularly applies to general varying-coefficient parametric models, such as AR or GARCH, whose coefficients may arbitrarily vary with time. Global parametric, smooth transition, and changepoint models are special cases. The method is based on an adaptive pointwise selection of the largest interval of homogeneity with a given right-end point by a local change-point analysis. We construct locally adaptive estimates that can perform this task and investigate them both from the theoretical point of view and by Monte Carlo simulations. In the particular case of GARCH estimation, the proposed method is applied to stock-index series and is shown to outperform the standard parametric GARCH model.
Subjects: 
adaptive pointwise estimation
autoregressive models
conditional heteroscedasticity models
local time-homogeneity
JEL: 
C13
C14
C22
Document Type: 
Working Paper

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