Adaptive Lasso for vector Multiplicative Error Models
The Institute of Economics will hold one of the meetings of its Seminar Series on Tuesday, April 2, 2019: Giampiero Gallo from Rimini Centre for Economic Research will present the paper "Adaptive Lasso for vector Multiplicative Error Models" (with Luca Cattivelli).
Abstract
In this paper, we adopt Adaptive Lasso techniques in vector Multiplicative Error Models (vMEM), and we show that they provide asymptotic consistency in variable selection and the same efficiency as if the set of true predictors were known in advance (oracle property). A Monte Carlo exercise demonstrates the good performance of this approach and an empirical application shows its effectiveness in studying the network of volatility spillovers among European financial indices, during and after the sovereign debt crisis. We conclude demonstrating the superior volatility forecast ability of Adaptive Lasso techniques in a context where a common trend is removed prior to multivariate volatility spillover analysis.