Likelihood inference in an Autoregression with fixed effects
AbstractWe calculate the bias of the profile score for the regression coefficients in a multistratum autoregressive model with stratum-specific intercepts. The bias is free of incidental parameters. Centering the profile score delivers an unbiased estimating equation and, upon integration, an adjusted profile likelihood. A variety of other approaches to constructing modified profile likelihoods are shown to yield equivalent results. However, the global maximizer of the adjusted likelihood lies at infinity for any sample size, and the adjusted profile score has multiple zeros. We argue that the parameters are local maximizers inside or on an ellipsoid centered at the maximum likelihood estimator.
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Bibliographic InfoPaper provided by Sciences Po in its series Sciences Po publications with number 2013-07.
Date of creation: Jan 2013
Date of revision:
adjusted likelihood; autoregression; incidental parameters; local maximizer; recentered estimating equation;
Other versions of this item:
- Geert Dhaene & Koen Jochmans, 2013. "Likelihood inference in an Autoregression with fixed effects," Sciences Po Economics Discussion Papers 2013-07, Sciences Po Departement of Economics.
- NEP-ALL-2014-04-11 (All new papers)
- NEP-ECM-2014-04-11 (Econometrics)
- NEP-ETS-2014-04-11 (Econometric Time Series)
- NEP-GER-2014-04-11 (German Papers)
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