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The Devil is in the Detail: Hints for Practical Optimisation


  • T M Christensen

    () (QUT)

  • A S Hurn

    () (QUT)

  • K A Lindsay

    () (University of Glasgow)


Finding the minimum of an objective function, such as a least squares or negative log-likelihood function, with respect to the unknown model parameters is a problem often encountered in econometrics. Consequently, students of econometrics and applied econometricians are usually well-grounded in the broad differences between the numerical procedures employed to solve these problems. Often, however, relatively little time is given to understanding the practical subtleties of implementing these schemes when faced with illbehaved problems. This paper addresses some of the details involved in practical optimisation, such as dealing with constraints on the parameters, specifying starting values, termination criteria and analytical gradients, and illustrates some of the general ideas with several instructive examples.

Suggested Citation

  • T M Christensen & A S Hurn & K A Lindsay, 2008. "The Devil is in the Detail: Hints for Practical Optimisation," NCER Working Paper Series 32, National Centre for Econometric Research.
  • Handle: RePEc:qut:auncer:2008-21

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    References listed on IDEAS

    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. John C. Cox & Jonathan E. Ingersoll Jr. & Stephen A. Ross, 2005. "A Theory Of The Term Structure Of Interest Rates," World Scientific Book Chapters,in: Theory Of Valuation, chapter 5, pages 129-164 World Scientific Publishing Co. Pte. Ltd..
    3. Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
    4. Chan, K C, et al, 1992. " An Empirical Comparison of Alternative Models of the Short-Term Interest Rate," Journal of Finance, American Finance Association, vol. 47(3), pages 1209-1227, July.
    5. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
    6. John Freebairn & Bill Griffiths, 2006. "Introduction," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages 1-1, September.
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    Cited by:

    1. David Allen & Michael McAleer, 2017. "Theoretical and Empirical Differences Between Diagonal and Full Bekk for Risk Management," Tinbergen Institute Discussion Papers 17-069/III, Tinbergen Institute.
    2. Gehrig, Thomas & Haas, Marlene, 2016. "Anomalous Trading Prior to Lehman Brothers' Failure," CEPR Discussion Papers 11194, C.E.P.R. Discussion Papers.

    More about this item


    gradient algorithms; unconstrained optimisation; generalised method of moments.;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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