Advanced Search
MyIDEAS: Login

Model Selection in the Presence of Incidental Parameters

Contents:

Author Info

Abstract

This paper considers model selection in nonlinear panel data models where incidental parameters or large-dimensional nuisance parameters are present. Primary interest typically centers on selecting a model that best approximates the underlying structure involving parameters that are common within the panel after concentrating out the incidental parameters. It is well known that conventional model selection procedures are often inconsistent in panel models and this can be so even without nuisance parameters (Han et al, 2012). Modifications are then needed to achieve consistency. New model selection information criteria are developed here that use either the Kullback-Leibler information criterion based on the profile likelihood or the Bayes factor based on the integrated likelihood with the robust prior of Arellano and Bonhomme (2009). These model selection criteria impose heavier penalties than those associated with standard information criteria such as AIC and BIC. The additional penalty, which is datadependent, properly reflects the model complexity arising from the presence of incidental parameters. A particular example is studied in detail involving lag order selection in dynamic panel models with fixed individual effects. The new criteria are shown to control for over/underselection probabilities in these models and lead to consistent order selection criteria.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.maxwell.syr.edu/uploadedFiles/cpr/publications/working_papers2/wp159.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Center for Policy Research, Maxwell School, Syracuse University in its series Center for Policy Research Working Papers with number 159.

as in new window
Length: 41 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:max:cprwps:159

Contact details of provider:
Postal: 426 Eggers Hall, Syracuse, New York USA 13244-1020
Phone: (315) 443-3114
Fax: (315) 443-1081
Email:
Web page: http://www.maxwell.syr.edu/cpr.aspx
More information through EDIRC

Related research

Keywords: (Adaptive) model selection; incidental parameters; profile likelihood; Kullback- Leibler information; Bayes factor; integrated likelihood; robust prior; model complexity; fixed effects; lag order;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Newey, W.K., 1989. "The Asymptotic Variance Of Semiparametric Estimotors," Papers 346, Princeton, Department of Economics - Econometric Research Program.
  2. Manuel Arellano & St├ęphane Bonhomme, 2009. "Robust Priors in Nonlinear Panel Data Models," Econometrica, Econometric Society, vol. 77(2), pages 489-536, 03.
  3. Lancaster, Tony, 2002. "Orthogonal Parameters and Panel Data," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 647-66, July.
  4. Maddala, G S, 1971. "The Use of Variance Components Models in Pooling Cross Section and Time Series Data," Econometrica, Econometric Society, vol. 39(2), pages 341-58, March.
  5. N. Sartori, 2003. "Modified profile likelihoods in models with stratum nuisance parameters," Biometrika, Biometrika Trust, vol. 90(3), pages 533-549, September.
  6. Jinyong Hahn & Whitney Newey, 2003. "Jackknife and analytical bias reduction for nonlinear panel models," CeMMAP working papers CWP17/03, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  7. Bester, C. Alan & Hansen, Christian, 2009. "A Penalty Function Approach to Bias Reduction in Nonlinear Panel Models with Fixed Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(2), pages 131-148.
  8. Andrews, Donald W K, 1994. "Asymptotics for Semiparametric Econometric Models via Stochastic Equicontinuity," Econometrica, Econometric Society, vol. 62(1), pages 43-72, January.
  9. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  10. Tony Lancaster, 2002. "Orthogonal Parameters and Panel Data," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 647-666.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Haruo Iwakura & Ryo Okui, 2014. "Asymptotic Efficiency in Factor Models and Dynamic Panel Data Models," KIER Working Papers 887, Kyoto University, Institute of Economic Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:max:cprwps:159. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kelly Bogart) or (Katrina Wingle).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.