David F. Hendry () (Dept of Economics, and Nuffield College, Oxford University) Hans-Martin Krolzig () (Department of Economics, and Nuffield College, Oxford University)
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When the DGP is nested in the model, PcGets delivers high performance selection across different (unknown) states of nature. One of its steps involves sub-sample post-selection assessment, and here we consider its properties and investigate its practical application. The simulation results show that conditional on retaining a variable, sub-sample information cannot discriminate between substantive and adventitious significance. The Monte Carlo experiments also reveal that the sub-sample selection method suggested by Hoover and Perez (1999) is dominated by procedures selecting only on full-sample evidence, when both approaches are evaluated at a given size. Nevertheless, although the sub-sample procedures do not result in a genuinely beneficial trade-off between size and power, they are particularly successful in controlling the size for selection problems that were previously seemed almost intractable.
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Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number
2003-W17.
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