Autoregressive Conditional Parameter Model and Applications

32 Pages Posted: 17 Mar 2016 Last revised: 17 Aug 2017

See all articles by Fengbin Lu

Fengbin Lu

Chinese Academy of Sciences (CAS) - Academy of Mathematics and Systems Sciences

Shouyang Wang

Chinese Academy of Sciences (CAS) - Center for Forecasting Science; Academy of Mathematics and Systems Sciences

Date Written: July 17, 2016

Abstract

This paper proposes a new time-varying parameter regression called the autoregressive conditional parameter (ACP) model. The model allows for time-varying conditional parameters such as the regression coefficients (beta coefficients), mean/intercept, variance, duration, skewness and kurtosis. In particular, the model provides a new method for time-varying betas. It’s shown that the model encompasses many wide-used time series models (e.g., the rolling linear regression, autoregressive and moving average, generalized autoregressive conditional heteroskedasticity, autoregressive conditional duration, autoregressive conditional skewness and kurtosis, and Poisson autoregression). Identification, estimation and test of ACP model are also examined. The empirical results show that the ACP model generally outperforms two popular time-varying parameter models (i.e., the state space model and dynamic conditional beta model).

Keywords: time-varying conditional parameter, autoregressive conditional parameter model, autoregressive conditional beta, commodity market

JEL Classification: C22, C50

Suggested Citation

Lu, Fengbin and Wang, Shouyang, Autoregressive Conditional Parameter Model and Applications (July 17, 2016). Available at SSRN: https://ssrn.com/abstract=2748946 or http://dx.doi.org/10.2139/ssrn.2748946

Fengbin Lu (Contact Author)

Chinese Academy of Sciences (CAS) - Academy of Mathematics and Systems Sciences ( email )

Zhong-Guan-Cun-Dong-Lu 55, Haidian District
Beijing, 100080, P.R., Beijing 100080
China

Shouyang Wang

Chinese Academy of Sciences (CAS) - Center for Forecasting Science; Academy of Mathematics and Systems Sciences ( email )

China

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
123
Abstract Views
1,081
Rank
412,003
PlumX Metrics