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Ordinary Least Squares Bias and Bias Corrections for iid Samples


  • Lonnie Magee


The O(n-1) bias and O(n-2) MSE of OLS are derived for iid samples. An approach is suggested for handling nonexistent finite sample moments. Bias corrections based on plug-in, weighting, jackknife and pairs bootstrap methods are equal to Op(n-3/2). Sometimes they are effective at lowering bias and MSE, but not always. In simulations, the bootstrap correction removes more bias than the others, but has a higher MSE. A hypothesis test is given for the presence of this bias. The techniques are applied to survey data on food expenditure, and the estimated bias is small and statistically insignificant.

Suggested Citation

  • Lonnie Magee, 2007. "Ordinary Least Squares Bias and Bias Corrections for iid Samples," Social and Economic Dimensions of an Aging Population Research Papers 207, McMaster University.
  • Handle: RePEc:mcm:sedapp:207

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    OLS bias; finite sample moments; Nagar approximation; bias correction; pairs bootstrap;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other

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