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Selecting a Regression Saturated by Indicators

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Author Info
Søren Johansen
David F. Hendry
Carlos Santos () (School of Economics and Management, University of Aarhus, Denmark and CREATES)

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Abstract

We consider selecting a regression model, using a variant of Gets, when there are more variables than observations, in the special case that the variables are impulse dummies (indicators) for every observation. We show that the setting is unproblematic if tackled appropriately, and obtain the finite-sample distribution of estimators of the mean and variance in a simple location-scale model under the null that no impulses matter. A Monte Carlo simulation confirms the null distribution, and shows power against an alternative of interest.We consider selecting a regression model, using a variant of Gets, when there are more variables than observations, in the special case that the variables are impulse dummies (indicators) for every observation. We show that the setting is unproblematic if tackled appropriately, and obtain the finite-sample distribution of estimators of the mean and variance in a simple location-scale model under the null that no impulses matter. A Monte Carlo simulation confirms the null distribution, and shows power against an alternative of interest.

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Publisher Info
Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2007-36.

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Length: 17
Date of creation: 07 Nov 2007
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Handle: RePEc:aah:create:2007-36

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Related research
Keywords: Indicators; regression saturation; subset selection; model selection.;

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Find related papers by JEL classification:
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions

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  1. Krolzig, Hans-Martin & Hendry, David F., 2001. "Computer automation of general-to-specific model selection procedures," Journal of Economic Dynamics and Control, Elsevier, vol. 25(6-7), pages 831-866, June. [Downloadable!] (restricted)
    Other versions:
  2. Hendry, David F & Hans-Martin Krolzig, 2003. "The Properties of Automatic Gets Modelling," Royal Economic Society Annual Conference 2003 105, Royal Economic Society. [Downloadable!]
    Other versions:
  3. David Hendry & Carlos Santos, 2007. "Automatic Tests For Super Exogeneity," Documentos de Trabalho em Economia (Working Papers in Economics) 11, Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto). [Downloadable!]
  4. Kevin D. Hoover & Stephen J. Perez, 1999. "Data mining reconsidered: encompassing and the general-to-specific approach to specification search," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 167-191.
    Other versions:
  5. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
    Other versions:
  6. Scheuren F., 2004. "Introduction," The American Statistician, American Statistical Association, vol. 58, pages 12-12, February. [Downloadable!] (restricted)
  7. David F. Hendry & Carlos Santos, 2004. "Regression Models with Data-based Indicator Variables," Economics Papers 2004-W04, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
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  8. Salkever, David S., 1976. "The use of dummy variables to compute predictions, prediction errors, and confidence intervals," Journal of Econometrics, Elsevier, vol. 4(4), pages 393-397, November. [Downloadable!] (restricted)
  9. Kevin D. Hoover & Stephen J. Perez, . "Truth and Robustness in Cross-country Growth Regressions," Department of Economics 01-01, California Davis - Department of Economics. [Downloadable!]
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  10. Granger, Clive W.J. & Hendry, David F., 2005. "A Dialogue Concerning A New Instrument For Econometric Modeling," Econometric Theory, Cambridge University Press, vol. 21(01), pages 278-297, February. [Downloadable!]
  11. Scheuren F., 2004. "Introduction," The American Statistician, American Statistical Association, vol. 58, pages 144-144, May. [Downloadable!] (restricted)
  12. Julia Campos & David F. Hendry & Hans-Martin Krolzig, 2003. "Consistent Model Selection by an Automatic "Gets" Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(s1), pages 803-819, December. [Downloadable!] (restricted)
  13. Scheuren, Fritz, 2004. "Introduction," The American Statistician, American Statistical Association, vol. 58, pages 224-224, August. [Downloadable!] (restricted)
  14. Scheuren, Fritz, 2004. "Introduction," The American Statistician, American Statistical Association, vol. 58, pages 290-291, November. [Downloadable!] (restricted)
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