Local Lagged Adapted Generalized Method of Moments: An Innovative Estimation and Forecasting Approach and its Applications

Otunuga Olusegun M. (), Ladde Gangaram S. and Ladde Nathan G.
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Otunuga Olusegun M.: Department of Mathematics and Statistics, Marshall University, One John Marshall Dr, Huntington, WV 25755, USA
Ladde Gangaram S.: Department of Mathematics and Statistics,University of South Florida, 4202 E. Fowler Avenue, Tampa, FL 33620, USA
Ladde Nathan G.: CSM, 5775 Glenridge Dr NE, Atlanta, GA 30328, USA

Journal of Time Series Econometrics, 2019, vol. 11, issue 1, 72

Abstract: In this work, an attempt is made to apply the Local Lagged Adapted Generalized Method of Moments (LLGMM) to estimate state and parameters in stochastic differential dynamic models. The development of LLGMM is motivated by parameter and state estimation problems in continuous-time nonlinear and non-stationary stochastic dynamic model validation problems in biological, chemical, engineering, energy commodity markets, financial, medical, military, physical sciences and social sciences. The byproducts of this innovative approach (LLGMM) are the balance between model specification and model prescription of continuous-time dynamic process and the development of discrete-time interconnected dynamic model of local sample mean and variance statistic process (DTIDMLSMVSP). Moreover, LLGMM is a dynamic non-parametric method. The DTIDMLSMVSP is an alternative approach to the GARCH(1,1) model, and it provides an iterative scheme for updating statistic coefficients in a system of generalized method of moment/observation equations. Furthermore, applications of LLGMM to energy commodities price, U.S. Treasury Bill interest rate and the U.S.–U.K. foreign exchange rate data strongly exhibit its unique role, scope and performance, in particular, in forecasting and confidence-interval problems in applied statistics.

Keywords: conceptual computational/theoretical parameter estimation scheme; method of moments; nonparametric; simulation; forecasting; mean square optimal procedure; reaction/response time delay (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1515/jtse-2016-0024

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