Augmented GARCH sequences: Dependence structure and asymptotics

The augmented GARCH model is a unification of numerous extensions of the popular and widely used ARCH process. It was introduced by Duan and besides ordinary (linear) GARCH processes, it contains exponential GARCH, power GARCH, threshold GARCH, asymmetric GARCH, etc. In this paper, we study the probabilistic structure of augmented $\mathrm {GARCH}(1,1)$ sequences and the asymptotic distribution of various functionals of the process occurring in problems of statistical inference. Instead of using the Markov structure of the model and implied mixing properties, we utilize independence properties of perturbed GARCH sequences to directly reduce their asymptotic behavior to the case of independent random variables. This method applies for a very large class of functionals and eliminates the fairly restrictive moment and smoothness conditions assumed in the earlier theory. In particular, we derive functional CLTs for powers of the augmented GARCH variables, derive the error rate in the CLT and obtain asymptotic results for their empirical processes under nearly optimal conditions.Comment: Published in at http://dx.doi.org/10.3150/07-BEJ120 the Bernoulli (http://isi.cbs.nl/bernoulli/) by the International Statistical Institute/Bernoulli Society (http://isi.cbs.nl/BS/bshome.htm

Weakly dependent functional data

Functional data often arise from measurements on fine time grids and are obtained by separating an almost continuous time record into natural consecutive intervals, for example, days. The functions thus obtained form a functional time series, and the central issue in the analysis of such data consists in taking into account the temporal dependence of these functional observations. Examples include daily curves of financial transaction data and daily patterns of geophysical and environmental data. For scalar and vector valued stochastic processes, a large number of dependence notions have been proposed, mostly involving mixing type distances between $\sigma$-algebras. In time series analysis, measures of dependence based on moments have proven most useful (autocovariances and cumulants). We introduce a moment-based notion of dependence for functional time series which involves $m$-dependence. We show that it is applicable to linear as well as nonlinear functional time series. Then we investigate the impact of dependence thus quantified on several important statistical procedures for functional data. We study the estimation of the functional principal components, the long-run covariance matrix, change point detection and the functional linear model. We explain when temporal dependence affects the results obtained for i.i.d. functional observations and when these results are robust to weak dependence.Comment: Published in at http://dx.doi.org/10.1214/09-AOS768 the Annals of Statistics (http://www.imstat.org/aos/) by the Institute of Mathematical Statistics (http://www.imstat.org

Split invariance principles for stationary processes

The results of Koml\'{o}s, Major and Tusn\'{a}dy give optimal Wiener approximation of partial sums of i.i.d. random variables and provide an extremely powerful tool in probability and statistical inference. Recently Wu [Ann. Probab. 35 (2007) 2294--2320] obtained Wiener approximation of a class of dependent stationary processes with finite $p$th moments, $2<p\le4$, with error term $o(n^{1/p}(\log n)^{\gamma})$, $\gamma>0$, and Liu and Lin [Stochastic Process. Appl. 119 (2009) 249--280] removed the logarithmic factor, reaching the Koml\'{o}s--Major--Tusn\'{a}dy bound $o(n^{1/p})$. No similar results exist for $p>4$, and in fact, no existing method for dependent approximation yields an a.s. rate better than $o(n^{1/4})$. In this paper we show that allowing a second Wiener component in the approximation, we can get rates near to $o(n^{1/p})$ for arbitrary $p>2$. This extends the scope of applications of the results essentially, as we illustrate it by proving new limit theorems for increments of stochastic processes and statistical tests for short term (epidemic) changes in stationary processes. Our method works under a general weak dependence condition covering wide classes of linear and nonlinear time series models and classical dynamical systems.Comment: Published in at http://dx.doi.org/10.1214/10-AOP603 the Annals of Probability (http://www.imstat.org/aop/) by the Institute of Mathematical Statistics (http://www.imstat.org

On the prediction of stationary functional time series

This paper addresses the prediction of stationary functional time series. Existing contributions to this problem have largely focused on the special case of first-order functional autoregressive processes because of their technical tractability and the current lack of advanced functional time series methodology. It is shown here how standard multivariate prediction techniques can be utilized in this context. The connection between functional and multivariate predictions is made precise for the important case of vector and functional autoregressions. The proposed method is easy to implement, making use of existing statistical software packages, and may therefore be attractive to a broader, possibly non-academic, audience. Its practical applicability is enhanced through the introduction of a novel functional final prediction error model selection criterion that allows for an automatic determination of the lag structure and the dimensionality of the model. The usefulness of the proposed methodology is demonstrated in a simulation study and an application to environmental data, namely the prediction of daily pollution curves describing the concentration of particulate matter in ambient air. It is found that the proposed prediction method often significantly outperforms existing methods

Break detection in the covariance structure of multivariate time series models

In this paper, we introduce an asymptotic test procedure to assess the stability of volatilities and cross-volatilites of linear and nonlinear multivariate time series models. The test is very flexible as it can be applied, for example, to many of the multivariate GARCH models established in the literature, and also works well in the case of high dimensionality of the underlying data. Since it is nonparametric, the procedure avoids the difficulties associated with parametric model selection, model fitting and parameter estimation. We provide the theoretical foundation for the test and demonstrate its applicability via a simulation study and an analysis of financial data. Extensions to multiple changes and the case of infinite fourth moments are also discussed.Comment: Published in at http://dx.doi.org/10.1214/09-AOS707 the Annals of Statistics (http://www.imstat.org/aos/) by the Institute of Mathematical Statistics (http://www.imstat.org