Functional linear regression: dependence and error contamination

Cheng Chen, Shaojun Guo and Xinghao Qiao

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Functional linear regression is an important topic in functional data analysis. It is commonly assumed that samples of the functional predictor are independent realizations of an underlying stochastic process, and are observed over a grid of points contaminated by iid measurement errors. In practice, however, the dynamical dependence across different curves may exist and the parametric assumption on the error covariance structure could be unrealistic. In this article, we consider functional linear regression with serially dependent observations of the functional predictor, when the contamination of the predictor by the white noise is genuinely functional with fully nonparametric covariance structure. Inspired by the fact that the autocovariance function of observed functional predictors automatically filters out the impact from the unobservable noise term, we propose a novel autocovariance-based generalized method-of-moments estimate of the slope function. We also develop a nonparametric smoothing approach to handle the scenario of partially observed functional predictors. The asymptotic properties of the resulting estimators under different scenarios are established. Finally, we demonstrate that our proposed method significantly outperforms possible competing methods through an extensive set of simulations and an analysis of a public financial dataset.

Keywords: autocovariance; eigenanalysis; errors-in-predictors; functional linear regression; generalized method-of-moments; local linear smoothing (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2022-01-01
New Economics Papers: this item is included in nep-ecm and nep-ore
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Business and Economic Statistics, 1, January, 2022, 40(1), pp. 444 - 457. ISSN: 0735-0015

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:114636

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