Penalized Convex Estimation in Dynamic Location-Scale models

ALAMI CHENTOUFI, Reda (2025): Penalized Convex Estimation in Dynamic Location-Scale models.

Abstract

This paper introduces a two‑step convex estimator for dynamic location–scale models. Step 1 relies on a $\sqrt{T}$-consistent preliminary estimator. Step 2 minimizes an adaptive $L^1$‑penalized weighted least squares (WLS) criterion, yielding a sparse estimator. The objective is convex, avoiding the local‑optima issues of non‑convex optimizations. Consistency, asymptotic distribution, and model‑selection consistency are proven. Simulations confirm finite‑sample performance. A financial data set illustrates practical utility.

• Item Type: MPRA Paper
• Language: English
• Keywords: Weighted LSE; Adaptive LASSO estimation; variable selection; GARCH models; ARMA models; Location–scale dynamics
• Subjects: C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics

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