Self-weighted GEL Methods for Infinite Variance Processes

Least absolute deviations (LAD) estimation of linear time series models is considered under conditional heteroskedasticity and serial correlation. The limit theory of the LAD estimator is obtained without assuming the finite density condition for the errors that is required in standard LAD asymptotics. The results are particularly useful in application of LAD estimation to financial time series data.

We consider an L 1 analogue of the least squares estimator for the parameters of stationary, finite-order autoregressions. This estimator, the least absolute deviation (LAD), is shown to be strongly consistent via a result that may have independent interest. The striking feature is that the conditions are so mild as to include processes with infinite variance, notably the stationary, finite autoregressions driven by stable increments in Lα, α > 1. Finally, sampling properties of LAD are compared to those of least squares. Together with a known convergence rate result for least squares, the Monte Carlo study provides evidence for a conjecture on the convergence rate of LAD.

Least absolute deviation (LAD) is a well-known criterion to fit statistical models, but little is known about LAD estimation in structural equation modeling (SEM). To address this gap, the authors use the LAD criterion in SEM by minimizing the sum of the absolute deviations between the observed and the model-implied covariance matrices. Using Monte Carlo simulations, the authors compare the performance of this LAD estimator along several dimensions (bias, efficiency, convergence, frequencies of improper solutions, and absolute percentage deviation) to the full information maximum likelihood (ML) and unweighted least squares (ULS) estimators in structural equation modeling. The results for LAD are mixed: There are special conditions under which the LAD estimator outperforms ML and ULS, but the simulation evidence does not support a general claim that LAD is superior to ML and ULS in small samples.

Bootstrap tests for unit roots based on LAD estimation

ABSTRACTThis article examines structural change tests based on generalized empirical likelihood methods in the time series context, allowing for dependent data. Standard structural change tests for the Generalized method of moments (GMM) are adapted to the generalized empirical likelihood (GEL) context. We show that when moment conditions are properly smoothed, these test statistics converge to the same asymptotic distribution as in the GMM, in cases with known and unknown breakpoints. New test statistics specific to GEL methods, and that are robust to weak identification, are also introduced. A simulation study examines the small sample properties of the tests and reveals that GEL-based robust tests performed well, both in terms of the presence and location of a structural change and in terms of the nature of identification.

Compact representation of signals and images is a key for many applications. Compactness is often achieved through linear transforms with good energy concentration property. We present an adaptive wavelet filter bank with fixed number of vanishing moments, plus additional local adaptation. Proposed adaptation method is conducted at each sample according to the least absolute deviation (LAD) criterion. Fixed vanishing moments provide for polynomial annihilation. Adaptation is aimed to achieve maximum sparseness for a wider class of signals, such as sine waves. LAD criterion results in more accurate adaptation on sudden changes of signal statistics. In this paper, an efficient LAD realization is proposed, in spite of nonexistence of the closed form solution. Combining least squares and LAD criterion, we have achieved unbiased adaptation, robust to noise. Due to its simplicity and acceptable computational speed, the proposed scheme is a good candidate for the real-world applications. In this paper, advantages of the proposed scheme are shown in signal denoising and reconstruction.

In order to identify the parameters of nonlinear Hammerstein model which are contaminated by colored noise and peak noise, the least absolute deviation (LAD) is selected as the objective function to solve the problem of large residual square when the identification data is disturbed by the impulse noise which obeys symmetrical alpha stable (SαS) distribution. However, LAD cannot meet the need of differentiability required by most algorithms. To improve robustness and to solve the nondifferentiable problem, an approximate least absolute deviation (ALAD) objective function is established by introducing a deterministic function to replace absolute value under certain situations. The proposed method is derived from ALAD criterion and extended stochastic gradient method. Due to the differentiability of the objective function, we can get a recursive identification algorithm which is simple and easy to calculate compared with LAD. The convergence of the proposed identification method is also proved by Lyapunov stability theory, and the simulation experiments show that the proposed method has higher accuracy and stronger robustness than the least square (LS) method in the identification of Hammerstein model with colored noise and impulse noise. The impact of impulse noise can be restrained effectively.

Geographically Weighted Regression (GWR) is an analytical method for data that contains spatial heterogeneity effects. However, parameter estimation in the GWR model has a weakness, namely it is prone to outliers and can cause the parameter estimation to be biased. This can be overcome by the Robust Geographically Weighted Regression (RGWR) method which is more robust against the presence of outliers. This method is suitable for Gross Regional Domestic Product (GRDP) data in West Java Province, which contains outliers and also has spatial effects. The data used in this study are secondary data obtained from the Central Statistics Agency (BPS) of West Java Province. The purpose of this study is to compare the Robust Geographically Weighted Regression (RGWR) method with the Least Absolute Deviation (LAD) Estimation and M-estimation and also to find out the factors that affect the Gross Regional Domestic Product (GRDP) in West Java Province in 2021 based on the model resulting from. Selection of the best model is seen based on the value of the coefficient of determination (R2) and Mean Squared of Error (MSE). The research results show that the Robust Geographically Weighted Regression (RGWR) method with M-estimation is much more effective in estimating the distribution of GRDP in West Java Province in 2021, seen from the larger coefficient of determination and the smaller Mean Square Error (MSE). The variables that have a significant influence on GRDP in West Java Province in 2021 are the variables of foreign investment and local income.

Local Walsh-average regression

We analyzed readily available Federal Aviation Administration (FAA) data on daily average flight times between major US airports. By subtracting out expected flight times and organizing the resulting deviations by origin and destination, we were able to identify unusual conditions and trace their sources. This approach facilitates detection of trends and anomalies in the National Airspace System (NAS) and opens up new possibilities for automated next-day analysis of operational problems. We arranged the deviations data as a two-way table and decomposed the average deviation in each cell as Deviation = System Effect + Origin Effect + Destination Effect + En route Effect. Least absolute deviations (LAD) estimation was chosen as the best method to analyze the FAA data. We studied the distributions of the four components of deviations as well as various relationships between them. This approach revealed some interesting phenomena, including the fact that certain airports work in a regime of being either a good origin or a good destination on any given day and the fact that geographically close airports track each other’s problems in terms of their terminal effects.

Approximation to the distribution of LAD estimators for censored regression by random weighting method

The widely used least absolute deviation (LAD) estimator with the smoothly clipped absolute deviation (SCAD) penalty function (abbreviated as LAD-SCAD) is known to produce corrupt estimates in the presence of outlying observations. The problem becomes more complicated when the number of predictors diverges. To overcome these problems, the LAD-SCAD based on sure independence screening (SIS) technique is put forward. The SIS method uses the rank correlation screening (RCS) algorithm in the pre-screening step and the traditional Pathwise coordinate descent algorithm for computing the sequence of the regularization parameters in the post screening step for onward model selection. It is now evident that the rank correlation is less robust against outliers. Motivated by these inadequacies, we propose to improvise the LAD-SCAD estimator using robust wrapped correlation screening (WCS) method by replacing the rank correlation in the SIS method with robust wrapped correlation. The proposed estimator is denoted as WCS+LAD-SCAD and will be employed for variable selection. The simulation study and real-life data examples show that the proposed procedure produces more efficient results compared to the existing methods.

Common econometric estimators such as least squares, least absolute deviations (LAD), instrumental variables, maximum likelihood, and semiparametric estimators are non-robust against data contamination. Despite the known superiority of high-breakdown point (HBP) estimators in such situations, the HBP estimators have rarely been used in economics. This article presents some applications of an HBP estimator called the S-estimator (Rousseeuw and Yohai, Robust and Nonlinear Time Series Analysis (Eds) W.H. Franke and R.D. Martin, Springer-Verlag, NY, pp. 256–72, 1984) to the estimation of a linear regression model and compares the results with those obtained by ordinary least squares (OLS) and LAD methods. It is found that significance of variables as well as signs of coefficient estimates can be quite different under HBP estimation than under OLS and LAD estimation.

Observations at the first opposition are used to determine the orbits of 16 near-Earth asteroids with two or more observed oppositions. The orbits are improved by the differential method. This paper considers two modifications of the improvement technique, which are compared to the classical method based on the principle of the least square method (LSM). The first modification uses the principle of least absolute deviations (LAD). In the second modification, the differences O - C (between the observed and calculated positions) are transformed to fit into a new coordinate system whereby the axes go parallel and perpendicular to the asteroid's apparent path (the modified differential method (MDM)). The orbits determined from one opposition by the classical LSM, LAD, and MDM are compared to a more accurate orbit calculated by the LSM from all the available oppositions. The calculations show that in 13 cases out of 16, the asteroid orbits calculated by LAD are more accurate than those calculated by the classical LSM. The improvement by the modified differential method, which includes the O - C transformation, does not produce any perceptible increase in accuracy when compared to the orbits calculated by the classical method.

In general linear modeling, an alternative to the method of least squares (LS) is the least absolute deviations (LAD) procedure. Although LS is more widely used, the LAD approach yields better estimates in the presence of outliers. In this paper, we examine the performance of LAD estimators for the parameters of the first‐order autoregressive model in the presence of outliers. A simulation study compared these estimates with those given by LS. The general conclusion is that LAD does not deal successfully with additive outliers. A simple procedure is proposed which allows exception reporting when outliers occur.