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Weighted average least squares estimation with nonspherical disturbances and an application to the Hong Kong housing market

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Author Info

  • Magnus, Jan R.
  • Wan, Alan T.K.
  • Zhang, Xinyu

Abstract

The recently proposed 'weighted average least squares' (WALS) estimator is a Bayesian combination of frequentist estimators. It has been shown that the WALS estimator possesses major advantages over standard Bayesian model averaging (BMA) estimators: the WALS estimator has bounded risk, allows a coherent treatment of ignorance and its computational effort is negligible. However, the sampling properties of the WALS estimator as compared to BMA estimators are heretofore unexamined. The WALS theory is further extended to allow for nonspherical disturbances, and the estimator is illustrated with data from the Hong Kong real estate market. Monte Carlo evidence shows that the WALS estimator performs significantly better than standard BMA and pretest alternatives.

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Bibliographic Info

Article provided by Elsevier in its journal Computational Statistics & Data Analysis.

Volume (Year): 55 (2011)
Issue (Month): 3 (March)
Pages: 1331-1341

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Handle: RePEc:eee:csdana:v:55:y:2011:i:3:p:1331-1341

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Web page: http://www.elsevier.com/locate/csda

Related research

Keywords: Model averaging Bayesian analysis Monte Carlo Housing demand;

References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Wan, Alan T.K. & Zhang, Xinyu & Zou, Guohua, 2010. "Least squares model averaging by Mallows criterion," Journal of Econometrics, Elsevier, vol. 156(2), pages 277-283, June.
  2. Ouysse, Rachida & Kohn, Robert, 2010. "Bayesian variable selection and model averaging in the arbitrage pricing theory model," Computational Statistics & Data Analysis, Elsevier, vol. 54(12), pages 3249-3268, December.
  3. Yuan, Zheng & Yang, Yuhong, 2005. "Combining Linear Regression Models: When and How?," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 1202-1214, December.
  4. Durlauf,S.N. & Johnson,P.A. & Temple,J.R.W., 2004. "Growth econometrics," Working papers 18, Wisconsin Madison - Social Systems.
    • Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
  5. Bruce E. Hansen, 2007. "Least Squares Model Averaging," Econometrica, Econometric Society, vol. 75(4), pages 1175-1189, 07.
  6. Joe Tak-Yun Wong & Eddie Hui & William Seabrooke & John Raftery, 2005. "A study of the Hong Kong property market: housing price expectations," Construction Management and Economics, Taylor & Francis Journals, vol. 23(7), pages 757-765.
  7. Leeb, Hannes & P tscher, Benedikt M., 2005. "Model Selection And Inference: Facts And Fiction," Econometric Theory, Cambridge University Press, vol. 21(01), pages 21-59, February.
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  10. Jan R. Magnus & Dmitry Danilov, 2004. "Forecast accuracy after pretesting with an application to the stock market," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(4), pages 251-274.
  11. Yang Y., 2001. "Adaptive Regression by Mixing," Journal of the American Statistical Association, American Statistical Association, vol. 96, pages 574-588, June.
  12. Helen X. H. Bao & Alan T. K. Wan, 2007. "Improved Estimators of Hedonic Housing Price Models," Journal of Real Estate Research, American Real Estate Society, vol. 29(3), pages 267-302.
  13. Leeb, Hannes & P tscher, Benedikt M., 2003. "The Finite-Sample Distribution Of Post-Model-Selection Estimators And Uniform Versus Nonuniform Approximations," Econometric Theory, Cambridge University Press, vol. 19(01), pages 100-142, February.
  14. Hannes Leeb & Benedikt M. Potscher, 2003. "Can One Estimate the Conditional Distribution of Post-Model-Selection Estimators?," Cowles Foundation Discussion Papers 1444, Cowles Foundation for Research in Economics, Yale University.
  15. Danilov, Dmitry & Magnus, J.R.Jan R., 2004. "On the harm that ignoring pretesting can cause," Journal of Econometrics, Elsevier, vol. 122(1), pages 27-46, September.
  16. Pena, Daniel & Redondas, Dolores, 2006. "Bayesian curve estimation by model averaging," Computational Statistics & Data Analysis, Elsevier, vol. 50(3), pages 688-709, February.
  17. Helen X.H. Bao & Alan T.K. Wan, 2004. "On the Use of Spline Smoothing in Estimating Hedonic Housing Price Models: Empirical Evidence Using Hong Kong Data," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(3), pages 487-507, 09.
  18. Claeskens,Gerda & Hjort,Nils Lid, 2008. "Model Selection and Model Averaging," Cambridge Books, Cambridge University Press, number 9780521852258, October.
  19. Schomaker, Michael & Wan, Alan T.K. & Heumann, Christian, 2010. "Frequentist Model Averaging with missing observations," Computational Statistics & Data Analysis, Elsevier, vol. 54(12), pages 3336-3347, December.
  20. Jan R. Magnus, 2002. "Estimation of the mean of a univariate normal distribution with known variance," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 225-236, June.
  21. Adkins, Lee C. & Eells, James B., 1995. "Improved estimators of energy models," Energy Economics, Elsevier, vol. 17(1), pages 15-25, January.
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Citations

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Cited by:
  1. Schomaker, Michael & Heumann, Christian, 2014. "Model selection and model averaging after multiple imputation," Computational Statistics & Data Analysis, Elsevier, vol. 71(C), pages 758-770.
  2. Karen Poghosyan & Jan R. Magnus, 2012. "WALS Estimation and Forecasting in Factor-based Dynamic Models with an Application to Armenia," International Econometric Review (IER), Econometric Research Association, vol. 4(1), pages 40-58, April.
  3. De Luca, G. & Magnus, J.R., 2011. "Bayesian Model Averaging and Weighted Average Least Squares: Equivariance, Stability, and Numerical Issues," Discussion Paper 2011-082, Tilburg University, Center for Economic Research.
  4. Sufrauj, Shamnaaz & Schiavo, Stefano & Riccaboni, Massimo, 2014. "The Structure and Growth of World Trade, and the Role of Europe in the Global Economy," MPRA Paper 54122, University Library of Munich, Germany.
  5. Poghosyan, K., 2012. "Structural and reduced-form modeling and forecasting with application to Armenia," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5590845, Tilburg University.

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