LASSO-driven inference in time and space

Victor Chernozhukov, Wolfgang Härdle, Chen Huang and Weining Wang
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Wolfgang Härdle: Institute for Fiscal Studies and Center for Applied Statistics and Economics
Chen Huang: Institute for Fiscal Studies and Faculty of Mathematics and Statistics, University of St. Gallen

No CWP36/18, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: We consider the estimation and inference in a system of high-dimensional regression equations allowing for temporal and cross-sectional dependency in covariates and error processes, covering rather general forms of weak dependence. A sequence of large-scale regressions with LASSO is applied to reduce the dimensionality, and an overall penalty level is carefully chosen by a block multiplier bootstrap procedure to account for multiplicity of the equations and dependencies in the data. Correspondingly, oracle properties with a jointly selected tuning parameter are derived. We further provide high-quality de-biased simultaneous inference on the many target parameters of the system. We provide bootstrap consistency results of the test procedure, which are based on a general Bahadur representation for the Z-estimators with dependent data. Simulations demonstrate good performance of the proposed inference procedure. Finally, we apply the method to quantify spillover effects of textual sentiment indices in a financial market and to test the connectedness among sectors.

Keywords: LASSO; time series; simultaneous inference; system of equations; Z-estimation; Bahadur representation; martingale decomposition (search for similar items in EconPapers)
Date: 2018-06-20
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Citations: View citations in EconPapers (28)

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Related works:
Working Paper: LASSO-Driven Inference in Time and Space (2020)
Working Paper: LASSO-Driven Inference in Time and Space (2019)
Working Paper: LASSO-Driven Inference in Time and Space (2018)
Working Paper: LASSO-Driven Inference in Time and Space (2018)
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