Nonparametric estimation of time-varying covariance matrix in a slowly changing vector random walk model

Yuanhua Feng and Keming Yu

MPRA Paper from University Library of Munich, Germany

Abstract: A new multivariate random walk model with slowly changing parameters is introduced and investigated in detail. Nonparametric estimation of local covariance matrix is proposed. The asymptotic distributions, including asymptotic biases, variances and covariances of the proposed estimators are obtained. The properties of the estimated value of a weighted sum of individual nonparametric estimators are also studied in detail. The integrated effect of the estimation errors from the estimation for the difference series to the integrated processes is derived. Practical relevance of the model and estimation is illustrated by application to several foreign exchange rates.

Keywords: Multivariate time series; slowly changing vector random walk; local covariance matrix; kernel estimation; asymptotic properties; forecasting (search for similar items in EconPapers)
JEL-codes: C14 C32 G00 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:1597

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