|
|
|
|
||||
|
||||
The Properties of Model Selection When Retaining Theory VariablesDavid F. HendryUniversity of Oxford - Department of Economics Soren JohansenUniversity of Copenhagen - Department of Economics; Aarhus University - CREATES October 28, 2011 University of Copenhagen Discussion Paper No. 11-25 Abstract: Economic theories are often fitted directly to data to avoid possible model selection biases. We show that embedding a theory model that specifies the correct set of m relevant exogenous variables, x{t}, within the larger set of m k candidate variables, (x{t},w{t}), then selection over the second set by their statistical significance can be undertaken without affecting the estimator distribution of the theory parameters. This strategy returns the theory-parameter estimates when the theory is correct, yet protects against the theory being under-specified because some w{t} are relevant.
Number of Pages in PDF File: 5 Keywords: Model selection, theory retention JEL Classification: C521, C18 working papers seriesDate posted: October 29, 2011Suggested CitationContact Information
|
|
|||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo2 in 0.437 seconds
