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Some Practical Issues in Maximum Simulated Likelihood

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  • V A Hajivassiliou

Abstract

In this paper, I explore ways of recapturing the efficiency property for estimators that rely on simulation. In particular, I show that this can be achieved by exploiting two-step maximum stimulated likelihood (SL) estimation methods that are familiar from classical applications. I also construct a diagnostic test for adequacy of number of simulations employed to guarantee negligible bias for the MSL and provide some evidence on the computational requirements of the Geweke-Hajivassiliou-Keane (GHK) simulator as a function of (a) the dimension of the problem and (b) the number of simulations employed in a vectorized context. I outline how one can derive a similar approach for checking the adequacy of the number of Gibbs resamplings in simulation estimation methods the employ this technique. This chapter also shows how to suitably introduce simulation into classical hypothesis testing methods and provide test statistics (simulated Wald, Lagrange Multiplier, and Likelihood Ratio Tests) that are free of influential simulation noise. Finally, I explain how simulation-variance-reduction techniques, notably antithetics, can improve substantially the practical performance of the GHK simulator and present extensive Monte-Carlo evidence confirming this.

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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Econometrics Paper Series with number /1997/340.

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Date of creation: Nov 1997
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Handle: RePEc:cep:stiecm:/1997/340

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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

Related research

Keywords: Simulation estimation; maximum simulated likelihood; limited dependent variable models; antithetic acceleration.;

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Cited by:
  1. Dennis Kristensen & Bernard Salanié, 2010. "Higher Order Improvements for Approximate Estimators," CAM Working Papers 2010-04, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  2. Damien Rousselière & Samira Rousselière, 2010. "On the impact of trust on consumer willingness to purchase GM food:Evidence from a European survey," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 91(1), pages 5-26.
  3. Victoria Prowse, 2005. "State Dependence in a Multi-state Model of Employment," Economics Papers 2005-W20, Economics Group, Nuffield College, University of Oxford.
  4. de Lapparent, M., & Axhausen , K.W. & Frei, A., 2013. "Long distance mode choice and distributions of values of travel time savings in three European countries," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 53, pages 7.
  5. Victoria Prowse, 2005. "State Dependence in a Multi-state Model of Employment Dynamics," Economics Series Working Papers 2005-W20, University of Oxford, Department of Economics.
  6. Paul Contoyannis & Andrew M. Jones & Roberto Leon-Gonzalez, 2002. "Using Simulation-based Inference with Panel Data in Health Economics," Department of Economics Working Papers 2002-13, McMaster University.
  7. Ronald Goettler & Ron Shachar, 2000. "Estimating Product Characteristics and Spatial Competition in the Network Television Industry," Econometric Society World Congress 2000 Contributed Papers 1691, Econometric Society.
  8. Lorenzo Cappellari & Stephen P. Jenkins, 2003. "Multivariate probit regression using simulated maximum likelihood," Stata Journal, StataCorp LP, vol. 3(3), pages 278-294, September.
  9. Carlos Arias & THOMAS L. COX, 1998. "Estimation of a U.S. Dairy Sector Model by Maximum Simulated Likelihood," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 417, Wisconsin-Madison Agricultural and Applied Economics Department.
  10. Falk, Martin, 1999. "Technological innovations and the expected demand for skilled labour at the firm level," ZEW Discussion Papers 99-59, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Jacques Huguenin & Florian Pelgrin & Alberto Holly, 2009. "Estimation of multivariate probit models by exact maximum likelihood," Working Papers 0902, University of Lausanne, Institute of Health Economics and Management (IEMS).
  12. Otto Toivanen & Michael Waterson, 2005. "Market Structure and Entry: Where's the Beef?," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 680-699, Autumn.

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