Partially adaptive estimation via the maximum entropy densities
AbstractWe propose a partially adaptive estimator based on information theoretic maximum entropy estimates of the error distribution. The maximum entropy (maxent) densities have simple yet flexible functional forms to nest most of the mathematical distributions. Unlike the non-parametric fully adaptive estimators, our parametric estimators do not involve choosing a bandwidth or trimming, and only require estimating a small number of nuisance parameters, which is desirable when the sample size is small. Monte Carlo simulations suggest that the proposed estimators fare well with non-normal error distributions. When the errors are normal, the efficiency loss due to redundant nuisance parameters is negligible as the proposed error densities nest the normal. The proposed partially adaptive estimator compares favourably with existing methods, especially when the sample size is small. We apply the estimator to a stochastic frontier model, whose error distribution is usually non-normal. Copyright 2005 Royal Economic Society
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Econometrics Journal.
Volume (Year): 8 (2005)
Issue (Month): 3 (December)
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- Thanasis Stengos & Ximing Wu, 2010.
"Information-Theoretic Distribution Test with Application to Normality,"
Taylor & Francis Journals, vol. 29(3), pages 307-329.
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- Thanasis Stengos & Ximing Wu†, 2007. "We derive general distribution tests based on the method of Maximum Entropy density," Working Paper Series 24-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
- Rompolis, Leonidas S., 2010. "Retrieving risk neutral densities from European option prices based on the principle of maximum entropy," Journal of Empirical Finance, Elsevier, vol. 17(5), pages 918-937, December.
- Pendharkar, Parag C., 2008. "Maximum entropy and least square error minimizing procedures for estimating missing conditional probabilities in Bayesian networks," Computational Statistics & Data Analysis, Elsevier, vol. 52(7), pages 3583-3602, March.
- Steven Caudill, 2012. "A partially adaptive estimator for the censored regression model based on a mixture of normal distributions," Statistical Methods and Applications, Springer, vol. 21(2), pages 121-137, June.
- Usta, Ilhan & Kantar, Yeliz Mert, 2011. "On the performance of the flexible maximum entropy distributions within partially adaptive estimation," Computational Statistics & Data Analysis, Elsevier, vol. 55(6), pages 2172-2182, June.
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