Prediction Error of Small Area Predictors Shrinking Both Means and Variances |
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Authors: | Tapabrata Maiti Hao Ren Samiran Sinha |
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Institution: | 1. Department of Statistics and Probability, Michigan State University;2. CTB/McGraw‐Hill;3. Department of Statistics, Texas A&M University |
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Abstract: | The article considers a new approach for small area estimation based on a joint modelling of mean and variances. Model parameters are estimated via expectation–maximization algorithm. The conditional mean squared error is used to evaluate the prediction error. Analytical expressions are obtained for the conditional mean squared error and its estimator. Our approximations are second‐order correct, an unwritten standardization in the small area literature. Simulation studies indicate that the proposed method outperforms the existing methods in terms of prediction errors and their estimated values. |
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Keywords: | bias correction conditional mean squared error EM algorithm empirical Bayes hierarchical models numerical integration sampling variance small area estimation |
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