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A Monte Carlo Investigation of the Box-Cox Model and a Nonlinear Least Squares Alternative

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  • Showalter, Mark H

Abstract

This paper reports a Monte Carlo study of the Box-Cox model and a nonlinear least squares alternative. Key results include the following: the transformation parameter in the Box-Cox model appears to be inconsistently estimated in the presence of conditional heteroskedasticity; the constant term in both the Box-Cox and the nonlinear least squares models is poorly estimated in small samples; conditional mean forecasts tend to underestimate their true value in the Box-Cox model when the transformation parameter is not equal to one; and conditional heteroskedasticity tends to worsen the bias in the Box-Cox predicted values. Copyright 1994 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 76 (1994)
Issue (Month): 3 (August)
Pages: 560-70

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Handle: RePEc:tpr:restat:v:76:y:1994:i:3:p:560-70

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Asplund, Marcus, 2000. "What Fraction of a Capital Investment Is Sunk Costs?," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 48(3), pages 287-304, September.
  2. James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers, School of Economics, La Trobe University 2013.08, School of Economics, La Trobe University.
  3. Nawata, K. & Kawabuchi, K., 2013. "Evaluation of the DPC-based inclusive payment system in Japan for cataract operations by a new model," Mathematics and Computers in Simulation (MATCOM), Elsevier, Elsevier, vol. 93(C), pages 76-85.
  4. Kazumitsu Nawata, 2013. "A new estimator of the Box-Cox transformation model using moment conditions," Economics Bulletin, AccessEcon, vol. 33(3), pages 2287-2297.
  5. Jason Abrevaya, 2002. "Computing Marginal Effects In The Box-Cox Model," Econometric Reviews, Taylor & Francis Journals, Taylor & Francis Journals, vol. 21(3), pages 383-393.
  6. Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, Elsevier, vol. 17(3), pages 283-295, June.

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