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Alternative Asymptotics and the Partially Linear Model with Many Regressors

Author

Listed:
  • Matias D. Cattaneo

    (University of Michigan)

  • Michael Jansson

    (UC Berkeley and CREATES)

  • Whitney K. Newey

    (MIT Department of Economics)

Abstract

Non-standard distributional approximations have received considerable attention in recent years. They often provide more accurate approximations in small samples, and theoretical improvements in some cases. This paper shows that the seemingly unrelated "?many instruments asymptotics" ?and "?small bandwidth asymptotics" ?share a common structure, where the object determining the limiting distribution is a V-statistic with a remainder that is an asymptotically normal degenerate U-statistic. This general structure can be used to derive new results. We employ it to obtain a new asymptotic distribution of a series estimator of the partially linear model when the number of terms in the series approximation possibly grows as fast as the sample size. This alternative asymptotic experiment implies a larger asymptotic variance than usual. When the disturbance is homoskedastic, this larger variance is consistently estimated by any of the usual homoskedastic-consistent estimators provided a "?degrees-of-freedom correction?" is used. Under heteroskedasticity of unknown form, however, none of the commonly used heteroskedasticity-robust standard-error estimators are consistent under the "?many regressors asymptotics"?. We characterize the source of this failure, and we also propose a new standard-error estimator that is consistent under both heteroskedasticity and ?"many regressors asymptotics"?. A small simulation study shows that these new confidence intervals have reasonably good empirical size in finite samples.

Suggested Citation

  • Matias D. Cattaneo & Michael Jansson & Whitney K. Newey, 2012. "Alternative Asymptotics and the Partially Linear Model with Many Regressors," CREATES Research Papers 2012-02, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:create:2012-02
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    References listed on IDEAS

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    Citations

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    Cited by:

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    2. Anatolyev, Stanislav, 2021. "Mallows criterion for heteroskedastic linear regressions with many regressors," Economics Letters, Elsevier, vol. 203(C).
    3. Matias D Cattaneo & Michael Jansson & Xinwei Ma, 2019. "Two-Step Estimation and Inference with Possibly Many Included Covariates," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(3), pages 1095-1122.
    4. Matias D. Cattaneo & Max H. Farrell & Michael Jansson & Ricardo Masini, 2022. "Higher-order Refinements of Small Bandwidth Asymptotics for Density-Weighted Average Derivative Estimators," Papers 2301.00277, arXiv.org, revised Feb 2024.
    5. Anatolyev, Stanislav & Sølvsten, Mikkel, 2023. "Testing many restrictions under heteroskedasticity," Journal of Econometrics, Elsevier, vol. 236(1).
    6. Galbraith, John W. & Zinde-Walsh, Victoria, 2020. "Simple and reliable estimators of coefficients of interest in a model with high-dimensional confounding effects," Journal of Econometrics, Elsevier, vol. 218(2), pages 609-632.
    7. Fan, Yanqin & Han, Fang & Li, Wei & Zhou, Xiao-Hua, 2020. "On rank estimators in increasing dimensions," Journal of Econometrics, Elsevier, vol. 214(2), pages 379-412.
    8. Richard, Patrick, 2019. "Residual bootstrap tests in linear models with many regressors," Journal of Econometrics, Elsevier, vol. 208(2), pages 367-394.
    9. Mittag, Nikolas, 2019. "A simple method to estimate large fixed effects models applied to wage determinants," Labour Economics, Elsevier, vol. 61(C).
    10. Bruce E. Hansen, 2016. "The Risk of James--Stein and Lasso Shrinkage," Econometric Reviews, Taylor & Francis Journals, vol. 35(8-10), pages 1456-1470, December.
    11. Harold D Chiang & Yuya Sasaki, 2023. "On Using The Two-Way Cluster-Robust Standard Errors," Papers 2301.13775, arXiv.org.
    12. Smith, Simon C. & Timmermann, Allan & Zhu, Yinchu, 2019. "Variable selection in panel models with breaks," Journal of Econometrics, Elsevier, vol. 212(1), pages 323-344.
    13. Wang, Wenjie, 2021. "Bootstrap Inference for Partially Linear Model with Many Regressors," MPRA Paper 106391, University Library of Munich, Germany.
    14. Holland, Ashley D., 2017. "Penalized spline estimation in the partially linear model," Journal of Multivariate Analysis, Elsevier, vol. 153(C), pages 211-235.
    15. Kuanhao Jiang & Rajarshi Mukherjee & Subhabrata Sen & Pragya Sur, 2022. "A New Central Limit Theorem for the Augmented IPW Estimator: Variance Inflation, Cross-Fit Covariance and Beyond," Papers 2205.10198, arXiv.org, revised Oct 2022.
    16. Yanqin Fan & Fang Han & Wei Li & Xiao-Hua Zhou, 2019. "On rank estimators in increasing dimensions," Papers 1908.05255, arXiv.org.
    17. Duncan Sheppard Gilchrist & Emily Glassberg Sands, 2016. "Something to Talk About: Social Spillovers in Movie Consumption," Journal of Political Economy, University of Chicago Press, vol. 124(5), pages 1339-1382.

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    More about this item

    Keywords

    partially linear model; many terms; adjusted variance.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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