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Signal regression models for location, scale and shape with an application to stock returns
Author(s) -
Brockhaus Sarah,
Fuest Andreas,
Mayr Andreas,
Greven Sonja
Publication year - 2018
Publication title -
journal of the royal statistical society: series c (applied statistics)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.205
H-Index - 72
eISSN - 1467-9876
pISSN - 0035-9254
DOI - 10.1111/rssc.12252
Subject(s) - econometrics , mathematics , model selection , covariate , inference , likelihood function , identifiability , statistics , statistical inference , regression , computer science , estimation theory , artificial intelligence
Summary We discuss scalar‐on‐function regression models where all parameters of the assumed response distribution can be modelled depending on covariates. We thus combine signal regression models with generalized additive models for location, scale and shape. Our approach is motivated by a time series of stock returns, where it is of interest to model both the expectation and the variance depending on lagged response values and functional liquidity curves. We compare two fundamentally different methods for estimation, a gradient boosting and a penalized‐likelihood‐based approach, and address practically important points like identifiability and model choice. Estimation by a componentwise gradient boosting algorithm allows for high dimensional data settings and variable selection. Estimation by a penalized‐likelihood‐based approach has the advantage of directly provided statistical inference.