Nearly-singular design in GMM and generalized empirical likelihood estimators

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Nearly-singular design in GMM and generalized empirical likelihood estimators

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Caner, Mehmet

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Mehmet Caner

Abstract

Nearly-Singular design relaxes the nonsingularity assumption of the limit weight matrix in GMM, and the nonsingularity of the limit variance matrix for the first order conditions in GEL. The sample versions of these matrices are nonsingular, but in large samples we assume these sample matrices converge to a singular matrix. This can result in size distortions for the overidentifying restrictions test and large bias for the estimators. This nearly-singular design may occur because of the similar instruments in these matrices. We derive the large sample theory for GMM and GEL estimators under nearly-singular design. The rate of convergence of the estimators is slower than root n.

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Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 144 (2008)
Issue (Month): 2 (June)
Pages: 511-523
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Handle: RePEc:eee:econom:v:144:y:2008:i:2:p:511-523

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Paper
- Mehmet Caner, 2005. "Nearly Singular design in gmm and generalized empirical likelihood estimators," Working Papers 211, University of Pittsburgh, Department of Economics, revised Jan 2005. [Downloadable!]
- Mehmet Caner, 2005. "Nearly Singular Design In Gmm And Generalized Empirical Likelihood Estimators," Econometrics 0509019, EconWPA. [Downloadable!]

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