Using Model Selection Algorthims to Obtain Reliable Coefficient Estimates
This review surveys a number of common Model Selection Algorithms (MSAs), discusses how they relate to each other, and identifies factors that explain their relative performances. At the heart of MSA performance is the trade-off between Type I and Type II errors. Some relevant variables will be mistakenly excluded, and some irrelevant variables will be retained by chance. A successful MSA will find the optimal trade-off between the two types of errors for a given data environment. Whether a given MSA will be successful in a given environment depends on the relative costs of these two types of errors. We use Monte Carlo experimentation to illustrate these issues. We confirm that no MSA does best in all circumstances. Even the worst MSA in terms of overall performance – the strategy of including all candidate variables – sometimes performs best (viz., when all candidate variables are relevant). We also show how (i) the ratio of relevant to total candidate variables and (ii) DGP noise affect relative MSA performance. Finally, we discuss a number of issues complicating the task of MSAs in producing reliable coefficient estimates.
|Date of creation:||01 Jan 2011|
|Contact details of provider:|| Postal: Private Bag 4800, Christchurch, New Zealand|
Phone: 64 3 369 3123 (Administrator)
Fax: 64 3 364 2635
Web page: http://www.econ.canterbury.ac.nz
More information through EDIRC
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.:
- Castle Jennifer L. & Doornik Jurgen A & Hendry David F., 2011. "Evaluating Automatic Model Selection," Journal of Time Series Econometrics, De Gruyter, vol. 3(1), pages 1-33, February.
- Phillips, Peter C.B., 2005.
"Automated Discovery In Econometrics,"
Cambridge University Press, vol. 21(01), pages 3-20, February.
- Peter C.B. Phillips, 2004. "Automated Discovery in Econometrics," Cowles Foundation Discussion Papers 1469, Cowles Foundation for Research in Economics, Yale University.
- McAleer, Michael & Pagan, Adrian R & Volker, Paul A, 1985. "What Will Take the Con out of Econometrics?," American Economic Review, American Economic Association, vol. 75(3), pages 293-307, June.
- Leeb, Hannes & P tscher, Benedikt M., 2003. "The Finite-Sample Distribution Of Post-Model-Selection Estimators And Uniform Versus Nonuniform Approximations," Econometric Theory, Cambridge University Press, vol. 19(01), pages 100-142, February.
- Hannes Leeb & Benedikt M. Poetscher, 2000. "The Finite-Sample Distribution of Post-Model-Selection Estimators, and Uniform Versus Non-Uniform Approximations," Econometrics 0004001, EconWPA.
- Sune Karlsson & Tor Jacobson, 2004. "Finding good predictors for inflation: a Bayesian model averaging approach," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(7), pages 479-496.Full references (including those not matched with items on IDEAS)
- Jacobson, Tor & Karlsson, Sune, 2002. "Finding Good Predictors for Inflation: A Bayesian Model Averaging Approach," Working Paper Series 138, Sveriges Riksbank (Central Bank of Sweden).
When requesting a correction, please mention this item's handle: RePEc:cbt:econwp:11/03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Albert Yee)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.