A recursive online algorithm for the estimation of time-varying ARCH parameters

Details A recursive online algorithm for the estimation of time-varying ARCH parameters A recursive online algorithm for the estimation of time-varying ARCH parameters

2007-08-30

arxiv.org/abs/0708.4081v1

Bernoulli 2007, Vol. 13, No. 2, 389-422

Mathematics

Statistics Theory

Published at http://dx.doi.org/10.3150/07-BEJ5009 in the Bernoulli (http://isi.cbs.nl/bernoulli/) by the International Statist

Scientific paper

10.3150/07-BEJ5009

In this paper we propose a recursive online algorithm for estimating the parameters of a time-varying ARCH process. The estimation is done by updating the estimator at time point $t-1$ with observations about the time point $t$ to yield an estimator of the parameter at time point $t$. The sampling properties of this estimator are studied in a non-stationary context -- in particular, asymptotic normality and an expression for the bias due to non-stationarity are established. By running two recursive online algorithms in parallel with different step sizes and taking a linear combination of the estimators, the rate of convergence can be improved for parameter curves from H\"{o}lder classes of order between 1 and 2.

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