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Adaptative LASSO estimation for ARDL models with GARCH innovations

Marcelo Medeiros () and Eduardo F. Mendes
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Eduardo F. Mendes: Department of Economics Australian School of Business

No 637, Textos para discussão from Department of Economics PUC-Rio (Brazil)

Abstract: In this paper we show the validity of the adaptive LASSO procedure in estimating stationary ARDL(p,q) models with GARCH innovations. We show that, given a set of initial weights, the adaptive Lasso selects the relevant variables with probability converging to one. Afterwards, we show that the estimator is oracle, meaning that its distribution converges to the same distribution of the oracle assisted least squares, i.e., the least squares estimator calculated as if we knew the set of relevant variables beforehand. Finally, we show that the LASSO estimator can be used to construct the initial weights. The performance of the method in finite samples is illustrated using Monte Carlo simulation

New Economics Papers: this item is included in nep-ecm
Date: 2015-04
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Journal Article: Adaptive LASSO estimation for ARDL models with GARCH innovations (2017) Downloads
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