Document Type
Discussion Paper
Publication Date
2-1-2004
CFDP Number
1452
CFDP Pages
33
Abstract
This paper deals with the estimation of linear dynamic models of the ARMA type for the conditional mean for time series with conditionally heteroskedastic innovation process widely used in modelling financial time series. Estimation is performed using subspace methods which are known to have computational advantages as compared to prediction error methods based on criterion minimization. These advantages are especially strong for high dimensional time series. The subspace methods are shown to provide consistent estimators. Moreover asymptotic equivalence to prediction error estimators in terms of the asymptotic variance is proved. Also order estimation techniques are proposed and analyzed. The estimators are not efficient as they do not model the conditional variance. Nevertheless, they can be used to obtain consistent estimators of the innovations. In a second step these estimated residuals can be used in order to levitate the problem of specifying the variance model in particular in the multi-output case. This is demonstrated in an ARCH setting, where it is proved that the estimated innovations can be used in place of the true innovations for testing in a linear least squares context in order to specify the structure of the ARCH model without changing the asymptotic distribution.
Recommended Citation
Bauer, Dietmar, "Using Subspace Methods for Estimating ARMA Models for Multivariate Time Series with Conditionally Heteroskedastic Innovations" (2004). Cowles Foundation Discussion Papers. 1728.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1728