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Sensitivity of GLS estimators in random effects models

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  • Vasnev, Andrey L.

Abstract

This paper studies the sensitivity of random effects estimators in the one-way error component regression model. Maddala and Mount (1973)Â [6] give simulation evidence that in random effects models the properties of the feasible GLS estimator are not affected by the choice of the first-step estimator used for the covariance matrix. Taylor (1980)Â [8] gives a theoretical example of this effect. This paper provides a reason for this in terms of sensitivity. The properties of are transferred via an uncorrelated (and independent under normality) link, called sensitivity. The sensitivity statistic counteracts the improvement in . A Monte Carlo experiment illustrates the theoretical findings.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Multivariate Analysis.

Volume (Year): 101 (2010)
Issue (Month): 5 (May)
Pages: 1252-1262

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Handle: RePEc:eee:jmvana:v:101:y:2010:i:5:p:1252-1262

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Related research

Keywords: Panel data Sensitivity analysis Random effects model;

References

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  1. Banerjee, Anurag N. & Magnus, Jan R., 1999. "The sensitivity of OLS when the variance matrix is (partially) unknown," Journal of Econometrics, Elsevier, vol. 92(2), pages 295-323, October.
  2. Taylor, William E., 1980. "Small sample considerations in estimation from panel data," Journal of Econometrics, Elsevier, vol. 13(2), pages 203-223, June.
  3. Don, F.J.H. & Magnus, J.R., 1980. "On the unbiasedness of iterated GLS estimators," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153209, Tilburg University.
  4. Baltagi, Badi H., 1981. "Pooling : An experimental study of alternative testing and estimation procedures in a two-way error component model," Journal of Econometrics, Elsevier, vol. 17(1), pages 21-49, September.
  5. Karim M. Abadir & Jan R. Magnus, 2002. "Notation in econometrics: a proposal for a standard," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 76-90, June.
  6. Jan R. Magnus & Andrey L. Vasnev, 2007. "Local sensitivity and diagnostic tests," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 166-192, 03.
  7. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  8. Magnus, J.R., 1986. "The exact moments of a ratio of quadratic forms in normal variables," Open Access publications from Tilburg University urn:nbn:nl:ui:12-153219, Tilburg University.
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