Oracle Properties and Finite Sample Inference of the Adaptive Lasso for Time Series Regression Models

Francesco Audrino and Lorenzo Camponovo

No 1327, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: We derive new theoretical results on the properties of the adaptive least absolute shrinkage and selection operator (adaptive lasso) for time series regression models. In particular we investigate the question of how to conduct finite sample inference on the parameters given an adaptive lasso model for some fixed value of the shrinkage parameter. Central in this study is the test of the hypothesis that a given adaptive lasso parameter equals zero, which therefore tests for a false positive. To this end we construct a simple (conservative) testing procedure and show, theoretically and empirically through extensive Monte Carlo simulations, that the adaptive lasso combines efficient parameter estimation, variable selection, and valid finite sample inference in one step. Moreover, we analytically derive a bias correction factor that is able to significantly improve the empirical coverage of the test on the active variables. Finally, we apply the introduced testing procedure to investigate the relation between the short rate dynamics and the economy, thereby providing a statistical foundation (from a model choice perspective) to the classic Taylor rule monetary policy model.

Keywords: Adaptive lasso; Time series; Oracle properties; Finite sample inference; Taylor rule monetary policy model. (search for similar items in EconPapers)
JEL-codes: C12 C22 E43 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2013-10
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1327.pdf (application/pdf)

Related works:
Working Paper: Oracle Properties and Finite Sample Inference of the Adaptive Lasso for Time Series Regression Models (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2013:27

Access Statistics for this paper

More papers in Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science Contact information at EDIRC.
Bibliographic data for series maintained by ().