Alternative Estimating And Testing Empirical Strategies For Fractional Regression Models
In many economic settings, the variable of interest is often a fraction or a proportion, being defined only on the unit interval. The bounded nature of such variables and, in some cases, the possibility of nontrivial probability mass accumulating at one or both boundaries raise some interesting estimation and inference issues. In this paper we: (i) provide a comprehensive survey of the main alternative models and estimation methods suitable to deal with fractional response variables; (ii) propose a full testing methodology to assess the validity of the assumptions required by each alternative estimator; and (iii) examine the finite sample properties of most of the estimators and tests discussed through an extensive Monte Carlo study. An application concerning corporate capital structure choices is also provided.
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Volume (Year): 25 (2011)
Issue (Month): 1 (02)
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References listed on IDEAS
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.:
- Joaquim J.S. Ramalho & Jacinto Vidigal da Silva, 2006.
"A two-part fractional regression model for the financial leverage decisions of micro, small, medium and large firms,"
Economics Working Papers
9_2006, University of Évora, Department of Economics (Portugal).
- Joaquim J.S. Ramalho & Jacinto Vidigal da Silva, 2009. "A two-part fractional regression model for the financial leverage decisions of micro, small, medium and large firms," Quantitative Finance, Taylor & Francis Journals, vol. 9(5), pages 621-636.
- Chesher, Andrew, 1983. "The information matrix test : Simplified calculation via a score test interpretation," Economics Letters, Elsevier, vol. 13(1), pages 45-48.
- Machado, Jose A F & Santos Silva, Joao M C, 2008. "Quantiles for Fractions and Other Mixed Data," Economics Discussion Papers 3550, University of Essex, Department of Economics.
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