Superiority comparisons of heterogeneous linear estimators |
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Authors: | Timo Teräsvirta |
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Institution: | 1. Department of Economics , University of Illinois , Champaign, IL, 61820;2. Research Institute of the Finnish Economy (ETLA) , Helsinki, SF, 00120, Finland |
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Abstract: | In this paper conditions for strong and weak superiority of a heterogeneous linear estimator over another are derived. The general results are applied to some special cases: in particular, two restricted least squares estimators are compared using the superiority conditions obtained. The weak superiority criterion is used as a basis in forming a generalization of an optimal se-quence of tests (Anderson, 1962) for searching for the best estimator when the alternative linear restrictions form a nested se-quence of hypotheses. An application of this is the determination of the correct length of lag and appropriate degree of polynomial in the estimation of polynomial distributed lag models. |
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Keywords: | biased estimation polynomial distributed lag proxy variables restricted least squares ridge regresssion |
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