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Approximate bias correction in econometrics

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  • MacKinnon, James G.
  • Smith Jr., Anthony A.

Abstract

This paper discusses ways to reduce the bias of consistent estimators that are biased in finite samples. It is necessary that the bias function, which relates parameter values to bias, should be estimable by computer simulation or by some other method. If so, bias can be reduced or, in some cases that may not be unrealistic, even eliminated. In general, several evaluations of the bias function will be required to do this. Unfortunately, reducing bias may increase the variance, or even the mean squared error, of an estimator. Whether or not it does so depends on the shape of the bias functions. The techniques of the paper are illustrated by applying them to two problems: estimating the autoregressive parameter in an AR(1) model with a constant term, and estimation of a logit model.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 85 (1998)
Issue (Month): 2 (August)
Pages: 205-230
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Handle: RePEc:eee:econom:v:85:y:1998:i:2:p:205-230

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For corrections or technical questions regarding this item, or to correct its listing, contact: (Jeroen Loos).

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  1. Davidson, Russell & MacKinnon, James G., 1992. "Regression-based methods for using control variates in Monte Carlo experiments," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 203-222.
  2. repec:cup:etheor:v:10:y:1994:i:1:p:116-29 is not listed on IDEAS
  3. Gourieroux, C. & Monfort, A. & Renault, E., 1992. "Indirect Inference," Papers 92.279, Toulouse - GREMAQ.
  4. Smith, A A, Jr, 1993. "Estimating Nonlinear Time-Series Models Using Simulated Vector Autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S63-84, Suppl. De.
  5. James G. MacKinnon & Anthony A. Smith, 1995. "Approximate Bias Correction in Econometrics," Working Papers 919, Queen's University, Department of Economics.
  6. Sawa, Takamitsu, 1978. "The exact moments of the least squares estimator for the autoregressive model," Journal of Econometrics, Elsevier, vol. 8(2), pages 159-172, October.
  7. Chesher, Andrew & Peters, Simon, 1994. "Symmetry, Regression Design, and Sampling Distributions," Econometric Theory, Cambridge University Press, vol. 10(01), pages 116-129, March.
  8. Russell Davidson & James G. MacKinnon, 1990. "Regression-Based Methods for Using Control and Antithetic Variates in Monte Carlo Experiments," Working Papers 781, Queen's University, Department of Economics.
  9. repec:cup:etheor:v:9:y:1993:i:1:p:62-80 is not listed on IDEAS
  10. Kiviet, Jan F. & Phillips, Garry D. A., 1994. "Bias assessment and reduction in linear error-correction models," Journal of Econometrics, Elsevier, vol. 63(1), pages 215-243, July.
  11. Orcutt, Guy H & Winokur, Herbert S, Jr, 1969. "First Order Autoregression: Inference, Estimation, and Prediction," Econometrica, Econometric Society, vol. 37(1), pages 1-14, January.
  12. Tony Smith & Fallaw Sowell & Stanley Zin, . "Fractional integration with Drift: Estimation in Small Samples," GSIA Working Papers 22, Carnegie Mellon University, Tepper School of Business.
  13. Phillips, Peter C. B., 1988. "The ET Interview: Professor James Durbin," Econometric Theory, Cambridge University Press, vol. 4(01), pages 125-157, April.
  14. Andrews, Donald W K, 1993. "Exactly Median-Unbiased Estimation of First Order Autoregressive/Unit Root Models," Econometrica, Econometric Society, vol. 61(1), pages 139-65, January.
  15. Kiviet, Jan F. & Phillips, Garry D.A., 1993. "Alternative Bias Approximations in Regressions with a Lagged-Dependent Variable," Econometric Theory, Cambridge University Press, vol. 9(01), pages 62-80, January.
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