A plug-in averaging estimator for regressions with heteroskedastic errors
AbstractThis paper proposes a new model averaging estimator for the linear regression model with heteroskedastic errors. We address the issues of how to optimally assign the weights for candidate models and how to make inference based on the averaging estimator. We derive the asymptotic mean squared error (AMSE) of the averaging estimator in a local asymptotic framework, and then choose the optimal weights by minimizing the AMSE. We propose a plug-in estimator of the optimal weights and use these estimated weights to construct a plug-in averaging estimator of the parameter of interest. We derive the asymptotic distribution of the plug-in averaging estimator and suggest a plug-in method to construct confidence intervals. Monte Carlo simulations show that the plug-in averaging estimator has much smaller expected squared error, maximum risk, and maximum regret than other existing model selection and model averaging methods. As an empirical illustration, the proposed methodology is applied to cross-country growth regressions.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 41414.
Date of creation: 10 Aug 2012
Date of revision:
Local asymptotic theory; Model averaging; Model selection; Plug-in estimators;
Find related papers by JEL classification:
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-ECM-2012-09-30 (Econometrics)
- NEP-ORE-2012-09-30 (Operations Research)
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