Pseudo-variance quasi-maximum likelihood estimation of semi-parametric time series models

Mirko Armillotta and Paolo Gorgi
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Paolo Gorgi: Vrije Universiteit Amsterdam

No 23-054/III, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We propose a novel estimation approach for a general class of semi-parametric time series models where the conditional expectation is modeled through a parametric function. The proposed class of estimators is based on a Gaussian quasi-likelihood function and it relies on the specification of a parametric pseudo-variance that can contain parametric restrictions with respect to the conditional expectation. The specification of the pseudo-variance and the parametric restrictions follow naturally in observation-driven models with bounds in the support of the observable process, such as count processes and double-bounded time series. We derive the asymptotic properties of the estimators and a validity test for the parameter restrictions. We show that the results remain valid irrespective of the correct specification of the pseudo variance. The key advantage of the restricted estimators is that they can achieve higher efficiency compared to alternative quasi-likelihood methods that are available in the literature. Furthermore, the testing approach can be used to build specification tests for parametric time series models. We illustrate the practical use of the methodology in a simulation study and two empirical applications featuring integer-valued autoregressive processes, where assumptions on the dispersion of the thinning operator are formally tested, and autoregressions for double-bounded data with application to a realized correlation time series.

Keywords: Double-bounded time series; integer-valued autoregressions; quasi-maximum likelihood. (search for similar items in EconPapers)
JEL-codes: C32 C52 C58 (search for similar items in EconPapers)
Date: 2023-10-12
New Economics Papers: this item is included in nep-ecm and nep-ets
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