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Dynamic modeling under linear-exponential loss

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  • Anatolyev, Stanislav

Abstract

We develop a methodology of parametric modeling of time series dynamics when the underlying loss function is linear-exponential (Linex). We propose to directly model the dynamics of the conditional expectation that determines the optimal predictor. The procedure hinges on the exponential quasi maximum likelihood interpretation of the Linex loss and nicely fits the multiple error modeling framework. Many conclusions relating to estimation, inference and forecasting follow from results already available in the econometric literature. The methodology is illustrated using data on United States GNP growth and Treasury bill returns.
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  • Anatolyev, Stanislav, 2009. "Dynamic modeling under linear-exponential loss," Economic Modelling, Elsevier, vol. 26(1), pages 82-89, January.
    • Handle: RePEc:eee:ecmode:v:26:y:2009:i:1:p:82-89
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    3. Stanislav Anatolyev & Natalia Kryzhanovskaya, 2009. "Directional Prediction of Returns under Asymmetric Loss: Direct and Indirect Approaches," Working Papers w0136, New Economic School (NES).

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    More about this item

    Keywords

    Linear-exponential loss Optimal predictor Quasi-maximum likelihood Multiplicative error model Autoregressive conditional durations;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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