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Likelihood inference in an Autoregression with fixed effects

Author

Listed:
  • Geert Dhaene

    (KU Leuven - Catholic University of Leuven - Katholieke Universiteit Leuven)

  • Koen Jochmans

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

We calculate the bias of the profile score for the regression coefficients in a multistratum autoregressive model with stratum-specific intercepts. The bias is free of incidental parameters. Centering the profile score delivers an unbiased estimating equation and, upon integration, an adjusted profile likelihood. A variety of other approaches to constructing modified profile likelihoods are shown to yield equivalent results. However, the global maximizer of the adjusted likelihood lies at infinity for any sample size, and the adjusted profile score has multiple zeros. We argue that the parameters are local maximizers inside or on an ellipsoid centered at the maximum likelihood estimator.

Suggested Citation

  • Geert Dhaene & Koen Jochmans, 2013. "Likelihood inference in an Autoregression with fixed effects," Working Papers hal-01070434, HAL.
  • Handle: RePEc:hal:wpaper:hal-01070434
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01070434
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    References listed on IDEAS

    as
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