Selecting the tuning parameter of the ℓ 1 trend filter
Hiroshi Yamada, Gawon Yoon · Studies in Nonlinear Dynamics and Econometrics · 2015
Abstract The ℓ 1 trend filter, which is similar to the popular Hodrick–Prescott (HP) filter, seems to be very promising because it enables us to estimate a piecewise linear trend without specifying the location and number of kink points a priori . Such a trend may be regarded as a result of occasional permanent shocks to the growth rate. Similarly to the HP filter, the value of the tuning parameter needs to be selected in applying this filter. This paper proposes a method for selecting the tuning parameter of the ℓ 1 trend filter and its generalization.