Sensitivity of GLS estimators in random effects models
This paper studies the sensitivity of random effects estimators in the one-way error component regression model. Maddala and Mount (1973)Â  give simulation evidence that in random effects models the properties of the feasible GLS estimator are not affected by the choice of the first-step estimator used for the covariance matrix. Taylor (1980)Â  gives a theoretical example of this effect. This paper provides a reason for this in terms of sensitivity. The properties of are transferred via an uncorrelated (and independent under normality) link, called sensitivity. The sensitivity statistic counteracts the improvement in . A Monte Carlo experiment illustrates the theoretical findings.
Volume (Year): 101 (2010)
Issue (Month): 5 (May)
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- Jan R. Magnus & Andrey L. Vasnev, 2007.
"Local sensitivity and diagnostic tests,"
Royal Economic Society, vol. 10(1), pages 166-192, 03.
- Magnus, J.R. & Vasnev, A.L., 2004. "Local Sensitivity and Diagnostic Tests," Discussion Paper 2004-105, Tilburg University, Center for Economic Research.
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- Karim M. Abadir & Jan R. Magnus, 2002. "Notation in econometrics: a proposal for a standard," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 76-90, June.
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- Taylor, William E., 1980. "Small sample considerations in estimation from panel data," Journal of Econometrics, Elsevier, vol. 13(2), pages 203-223, June.
- Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
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- J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
- Banerjee, Anurag N. & Magnus, Jan R., 1999. "The sensitivity of OLS when the variance matrix is (partially) unknown," Journal of Econometrics, Elsevier, vol. 92(2), pages 295-323, October.
- Magnus, J.R., 1986. "The exact moments of a ratio of quadratic forms in normal variables," Other publications TiSEM c6725407-ac3c-44fd-b6d1-5, Tilburg University, School of Economics and Management.
- Don, F.J.H. & Magnus, J.R., 1980. "On the unbiasedness of iterated GLS estimators," Other publications TiSEM 0651c9b8-01ec-451a-aced-2, Tilburg University, School of Economics and Management. Full references (including those not matched with items on IDEAS)
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