On the estimators of autocorrelation model parameters

TL;DR

This paper demonstrates that maximum likelihood estimation significantly outperforms variogram regression in estimating autocorrelation model parameters, especially with larger sample sizes, and provides more reliable confidence intervals.

Contribution

It shows that maximum likelihood estimation offers superior accuracy and confidence interval reliability over variogram regression for autocorrelation parameters, especially as sample size grows.

Findings

MLE accuracy improves by orders of magnitude with sample size

MLE provides reliable confidence intervals unlike variogram regression

For small samples, MLE still outperforms variogram regression in accuracy

Abstract

Estimation of autocorrelations and spectral densities is of fundamental importance in many fields of science, from identifying pulsar signals in astronomy to measuring heart beats in medicine. In circumstances where one is interested in specific autocorrelation functions that do not fit into any simple families of models, such as auto-regressive moving average (ARMA), estimating model parameters is generally approached in one of two ways: by fitting the model autocorrelation function to a non-parameteric autocorrelation estimate via regression analysis or by fitting the model autocorrelation function directly to the data via maximum likelihood. Prior literature suggests that variogram regression yields parameter estimates of comparable quality to maximum likelihood. In this letter we demonstrate that, as sample size is increases, the accuracy of the maximum-likelihood estimates (MLE) ultimately improves by orders of magnitude beyond that of variogram regression. For relatively continuous and Gaussian processes, this improvement can occur for sample sizes of less than 100. Moreover, even where the accuracy of these methods is comparable, the MLE remains almost universally better and, more critically, variogram regression does not provide reliable confidence intervals. Inaccurate regression parameter estimates are typically accompanied by underestimated standard errors, whereas likelihood provides reliable confidence intervals.