Local polynomial variance-function estimation

The conditional variance function in a heteroscedastic, nonparametric regression model is estimated by linear smoothing of squared residuals. Attention is focused on local polynomial smoothers. Both the mean and variance functions are assumed to be smooth, but neither is assumed to be in a parametric family. The biasing effect of preliminary estimation of the mean is studied, and a degrees-of-freedom correction of bias is proposed. The corrected method is shown to be adaptive in the sense that the variance function can be estimated with the same asymptotic mean and variance as if the mean function were known. A proposal is made for using standard bandwidth selectors for estimating both the mean and variance functions. The proposal is illustrated with data from the LIDAR method of measuring atmospheric pollutants and from turbulence-model computations.