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Bootstrap Methods For Covariance Structures

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  • Joel L. Horowitz

    (Univ. of Iowa)

Abstract

The optimal minimum distance (OMD) estimator for models of covariance structures is asymptotically efficient but has much worse finite-sample properties than does the equally-weighted minimum distance (EWMD) estimator. This paper shows how the bootstrap can be used to improve the finite-sample performance of the OMD estimator. The theory underlying the bootstrap's ability to reduce the bias of estimators and errors in the coverage probabilities of confidence intervals is summarized. The results of numerical experiments and an empirical example show that the bootstrap often essentially eliminates the bias of the OMD estimator. The finite-sample estimation efficiency of the bias-corrected OMD estimator often exceeds that of the EWMD estimator. Moreover, the true coverage probabilities of confidence intervals based on the OMD estimator with bootstrap critical values are very close to the nominal coverage probabilities.

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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 9610003.

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Length: 32 pages
Date of creation: 11 Oct 1996
Date of revision:
Handle: RePEc:wpa:wuwpem:9610003

Note: Zipped using PKZIP v2.04, encoded using UUENCODE v5.15. Zipped file includes 1 file --ui9613.wpa (WordPerfect 5.1 file 32 pages)
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  1. John M. Abowd & David Card, 1986. "Intertemporal Labor Supply and Long Term Employment Contracts," NBER Working Papers 1831, National Bureau of Economic Research, Inc.
  2. Robert E. Hall & Frederic S. Mishkin, 1980. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," NBER Working Papers 0505, National Bureau of Economic Research, Inc.
  3. Koenker, Roger & Machado, José A.F. & Skeels, Christopher L. & Welsh, Alan H., 1994. "Momentary Lapses: Moment Expansions and the Robustness of Minimum Distance Estimation," Econometric Theory, Cambridge University Press, vol. 10(01), pages 172-197, March.
  4. Robert E. Hall, 1987. "Consumption," NBER Working Papers 2265, National Bureau of Economic Research, Inc.
  5. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March.
  6. Griliches, Zvi, 1979. "Sibling Models and Data in Economics: Beginnings of a Survey," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S37-64, October.
  7. Joseph G. Altonji & Lewis M. Segal, 1994. "Small Sample Bias in GMM Estimation of Covariance Structures," NBER Technical Working Papers 0156, National Bureau of Economic Research, Inc.
  8. Behrman, Jere R & Rosenzweig, Mark R & Taubman, Paul, 1994. "Endowments and the Allocation of Schooling in the Family and in the Marriage Market: The Twins Experiment," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1131-74, December.
  9. repec:cup:etheor:v:10:y:1994:i:1:p:172-97 is not listed on IDEAS
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