2000), “Weighted least absolute deviations estimation for ARMA models with infinite variance,” Econometric Theory 23

For autoregressive and moving-average (ARMA) models with infinite variance innovations, quasi-likelihood based estimators (such as Whittle’s estimators) suffer from complex asymp-totic distributions depending on unknown tail indices. This makes the statistical inference for such models difficult. In contrast, the least absolute deviations estimators (LADE) are more appealing in dealing with heavy tailed processes. In this paper, we propose a weighted least absolute deviations estimator (WLADE) for ARMA models. We show that the proposed WLADE is asymptotically normal, unbiased and with the standard root-n convergence rate even when the variance of innovations is infinity. This paves the way for the statistical infer-ence based on asymptotic normality for heavy-tailed ARMA processes. For relatively small samples numerical results illustrate that the WLADE with appropriate weight is more accu-rate than the Whittle estimator, the quasi-maximum likelihood estimator (QMLE) and the Gauss-Newton estimator when the innovation variance is infinite, and that the efficiency-loss due to the use of weights in estimation is not substantial. The authors thank the two referees for their valuable suggestions. The work was partially supported by an EPSR