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Optimal Model Averaging of Mixed-Data Kernel-Weighted Spline Regressions

Author

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  • Jeffrey S. Racine
  • Qi Li
  • Li Zheng

Abstract

Model averaging has a rich history dating from its use for combining forecasts from time-series models (Bates & Granger 1969) and presents a compelling alternative to model selection methods. We propose a frequentist model average procedure defined over categorical regression splines (Ma, Racine & Yang 2015) that allows for non-nested and heteroskedastic candidate models. Theoretical underpinnings are provided, finite-sample performance is evaluated, and an empirical illustration reveals that the method is capable of outperforming a range of popular model selection criteria in applied settings. An R package is available for practitioners (Racine 2017).

Suggested Citation

  • Jeffrey S. Racine & Qi Li & Li Zheng, 2018. "Optimal Model Averaging of Mixed-Data Kernel-Weighted Spline Regressions," Department of Economics Working Papers 2018-10, McMaster University.
  • Handle: RePEc:mcm:deptwp:2018-10
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    File URL: http://socialsciences.mcmaster.ca/econ/rsrch/papers/archive/2018-10.pdf
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    References listed on IDEAS

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    1. Cheng, Xu & Hansen, Bruce E., 2015. "Forecasting with factor-augmented regression: A frequentist model averaging approach," Journal of Econometrics, Elsevier, vol. 186(2), pages 280-293.
    2. Tomohiro Ando & Ker-Chau Li, 2014. "A Model-Averaging Approach for High-Dimensional Regression," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 109(505), pages 254-265, March.
    3. Guido Kuersteiner & Ryo Okui, 2010. "Constructing Optimal Instruments by First-Stage Prediction Averaging," Econometrica, Econometric Society, vol. 78(2), pages 697-718, March.
    4. Andrews, Donald W. K., 1991. "Asymptotic optimality of generalized CL, cross-validation, and generalized cross-validation in regression with heteroskedastic errors," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 359-377, February.
    5. repec:taf:jnlasa:v:111:y:2016:i:516:p:1775-1790 is not listed on IDEAS
    6. Claeskens,Gerda & Hjort,Nils Lid, 2008. "Model Selection and Model Averaging," Cambridge Books, Cambridge University Press, number 9780521852258.
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