Seasonality in Regression: An Application of Smoothness Priors
AbstractThis article argues that conventional approaches to the treatment of seasonality in econometric investigation are often inappropriate. A more appropriate technique is to allow all regression coefficients to vary with the season, but to constrain them to do so in a smooth fashion. A Bayesian method of estimating smoothly varying seasonal coefficients is developed, based on Shiller's (1973) approach to estimating distributed lags. In a sampling experiment, this technique outperforms ordinary least squares by a substantial margin. An application of this technique to the estimation of the demand for soft drinks is also presented.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 257.
Date of creation: 1977
Date of revision:
Publication status: Published in Journal of the American Statistical Association, 73, 1978
seasonality; smoothness prior; distributed lag; mixed estimation; soft drinks;
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
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.:
- Michael C. Lovell, 1963. "Seasonal Adjustment of Economic Time Series and Multiple Regression," Cowles Foundation Discussion Papers 151, Cowles Foundation for Research in Economics, Yale University.
- Svend Hylleberg, 2006. "Seasonal Adjustment," Economics Working Papers 2006-04, School of Economics and Management, University of Aarhus.
- Rodríguez Poo, Juan M. & Ferreira García, María Eva & Orbe Mandaluniz, Susan, 2001.
"Nonparametric estimation of time varying parameters under shape restrictions,"
2001-02, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
- Orbe, Susan & Ferreira, Eva & Rodriguez-Poo, Juan, 2005. "Nonparametric estimation of time varying parameters under shape restrictions," Journal of Econometrics, Elsevier, vol. 126(1), pages 53-77, May.
- Robert J. Shiller, 1982. "Smoothness Priors and Nonlinear Regression," NBER Technical Working Papers 0025, National Bureau of Economic Research, Inc.
- Richard M. Todd, 1989. "Periodic linear-quadratic methods for modeling seasonality," Staff Report 127, Federal Reserve Bank of Minneapolis.
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