The Robustness of the Higher-Order 2SLS and General k-Class Bias Approximations to Non-Normal Disturbances
In a seminal paper Nagar (1959) obtained first and second moment approximations for the k-class of estimators in a general static simultaneous equation model under the assumption that the structural disturbances were i.i.d and normally distributed. Later Mikhail (1972) obtained a higher-order bias approximation for 2SLS under the same assumptions as Nagar while Iglesias and Phillips (2010) obtained the higher order approximation for the general k-class of estimators. These approximations show that the higher order biases can be important especially in highly overidentified cases. In this paper we show that Mikhail.s higher order bias approximation for 2SLS continues to be valid under symmetric, but not necessarily normal, disturbances with an arbitrary degree of kurtosis but not when the disturbances are asymmetric. A modified approximation for the 2SLS bias is then obtained which includes the case of asymmetric disturbances. The results are then extended to the general k-class of estimators.
|Date of creation:||Aug 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Aberconway Building, Colum Drive, CARDIFF, CF10 3EU|
Phone: +44 (0) 29 20874417
Fax: +44 (0) 29 20874419
Web page: http://business.cardiff.ac.uk/research/academic-sections/economics/working-papers
More information through EDIRC
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.:
- Kinal, Terrence W, 1980. "The Existence of Moments of k-Class Estimators," Econometrica, Econometric Society, vol. 48(1), pages 241-49, January.
- Phillips, Garry D. A., 2000.
"An alternative approach to obtaining Nagar-type moment approximations in simultaneous equation models,"
Journal of Econometrics,
Elsevier, vol. 97(2), pages 345-364, August.
- Phillips, G.D.A., 1999. "An Alternative Approach to Obtaining Nagar-Type Moment Approximations in Sumultaneous Equation Models," Discussion Papers 9905, Exeter University, Department of Economics.
- Iglesias, Emma M. & Phillips, Garry D.A., 2011. "Almost Unbiased Estimation in Simultaneous Equations Models with Strong and / or Weak Instruments," Cardiff Economics Working Papers E2011/19, Cardiff University, Cardiff Business School, Economics Section.
- Anderson, T. W. & Kunitomo, Naoto & Morimune, Kimio, 1986. "Comparing Single-Equation Estimators in a Simultaneous Equation System," Econometric Theory, Cambridge University Press, vol. 2(01), pages 1-32, April.
- Iglesias, Emma M. & Phillips, Garry D.A., 2010. "The bias to order T-Â 2 for the general k-class estimator in a simultaneous equation model," Economics Letters, Elsevier, vol. 109(1), pages 42-45, October.
- Sargan, J D, 1974. "The Validity of Nagar's Expansion for the Moments of Econometric Estimators," Econometrica, Econometric Society, vol. 42(1), pages 169-76, January.
- Knight, John L., 1985. "The moments of ols and 2sls when the disturbances are non-normal," Journal of Econometrics, Elsevier, vol. 27(1), pages 39-60, January.
When requesting a correction, please mention this item's handle: RePEc:cdf:wpaper:2011/20. 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: (Yongdeng Xu)
If references are entirely missing, you can add them using this form.