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Small Sample Bias of Alternative Estimation Methods for Moment Condition Models: Monte Carlo Evidence for Covariance Structures

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  • Ramalho Joaquim J.S.

    (Universidade de Evora)

Abstract

It is now widely recognized that the most commonly used efficient two-step GMM estimator may have large bias in small samples. In this paper we analyze by simulation the finite sample bias of two classes of alternative estimators. The first includes estimators which are asymptotically first-order equivalent to the GMM estimator, namely the continuous-updating, exponential tilting, and empirical likelihood estimators. Analytical and bootstrap bias-adjusted GMM estimators form the second class of alternatives. The Monte Carlo simulation study conducted in the paper for covariance structure models shows that all alternative estimators offer much reduced bias as compared to the GMM estimator, particularly the empirical likelihood and some of the bias-corrected GMM estimators.

Suggested Citation

  • Ramalho Joaquim J.S., 2005. "Small Sample Bias of Alternative Estimation Methods for Moment Condition Models: Monte Carlo Evidence for Covariance Structures," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(1), pages 1-20, March.
    • Handle: RePEc:bpj:sndecm:v:9:y:2005:i:1:n:3
    DOI: 10.2202/1558-3708.1202
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    3. Kreider, Brent & Pepper, John V., 2007. "Disability and Employment: Reevaluating the Evidence in Light of Reporting Errors," Journal of the American Statistical Association, American Statistical Association, vol. 102, pages 432-441, June.
    4. Philip Kostov, 2013. "Empirical likelihood estimation of the spatial quantile regression," Journal of Geographical Systems, Springer, vol. 15(1), pages 51-69, January.
    5. Yoshitsugu Kitazawa, 2014. "Consistent estimation for the full-fledged fixed effects zero-inflated Poisson model," Discussion Papers 66, Kyushu Sangyo University, Faculty of Economics.
    6. Ramalho, Joaquim J.S., 2006. "Bootstrap bias-adjusted GMM estimators," Economics Letters, Elsevier, vol. 92(1), pages 149-155, July.

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