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The Optimal Selection for Restricted Linear Models with Average Estimator

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  • Qichang Xie
  • Meng Du

Abstract

The essential task of risk investment is to select an optimal tracking portfolio among various portfolios. Statistically, this process can be achieved by choosing an optimal restricted linear model. This paper develops a statistical procedure to do this, based on selecting appropriate weights for averaging approximately restricted models. The method of weighted average least squares is adopted to estimate the approximately restricted models under dependent error setting. The optimal weights are selected by minimizing a k‐class generalized information criterion (k‐GIC), which is an estimate of the average squared error from the model average fit. This model selection procedure is shown to be asymptotically optimal in the sense of obtaining the lowest possible average squared error. Monte Carlo simulations illustrate that the suggested method has comparable efficiency to some alternative model selection techniques.

Suggested Citation

  • Qichang Xie & Meng Du, 2014. "The Optimal Selection for Restricted Linear Models with Average Estimator," Abstract and Applied Analysis, John Wiley & Sons, vol. 2014(1).
    • Handle: RePEc:wly:jnlaaa:v:2014:y:2014:i:1:n:692472
    DOI: 10.1155/2014/692472
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    References listed on IDEAS

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