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Econometrics Paper
More Efficient Kernel Estimation in Nonparametric Regression with Autocorrelated Errors
Raymond J Carroll, Oliver Linton, Enno Mammen and Zhijie Xiao June 2002
Paper No' EM/2002/435:
Full Paper (pdf)

Tags: backfitting; efficiency; kernel estimation; time series.

We propose a modification of kernel time series regression estimators that improves efficiency when the innovation process is autocorrelated. The procedure is based on a pre-whitening transformation of the dependent variable that has to be estimated from the data. We establish the asymptotic distribution of our estimator under weak dependence conditions. It is shown that the proposed estimation procedure is more efficient than the conventional kernel method. We also provide simulation evidence to suggest that gains can be achieved in moderate sized samples.