An Analysis of the Indicator Saturation Estimator as a Robust Regression Estimator

Johansen, Soren; Nielsen, Bent

doi:10.2139/ssrn.1129770

An Analysis of the Indicator Saturation Estimator as a Robust Regression Estimator

Univ. of Copenhagen Dept. of Economics Discussion Paper No. 08-03

36 Pages Posted: 6 May 2008

See all articles by Soren Johansen

Soren Johansen

University of Copenhagen - Department of Economics; Aarhus University - CREATES

Bent Nielsen

University of Oxford - Department of Economics

There are 2 versions of this paper

Date Written: 2008-02

Abstract

An algorithm suggested by Hendry (1999) for estimation in a regression with more regressors than observations, is analyzed with the purpose of finding an estimator that is robust to outliers and structural breaks. This estimator is an example of a one-step M-estimator based on Huber's skip function. The asymptotic theory is derived in the situation where there are no outliers or structural breaks using empirical process techniques. Stationary processes, trend stationary autoregressions and unit root processes are considered.

Keywords: empirical processes, Huber's skip, indicator saturation, M-estimator

JEL Classification: C32

Suggested Citation: Suggested Citation

Johansen, Soren and Nielsen, Bent, An Analysis of the Indicator Saturation Estimator as a Robust Regression Estimator (2008-02). Univ. of Copenhagen Dept. of Economics Discussion Paper No. 08-03. Available at SSRN: https://ssrn.com/abstract=1129770 or http://dx.doi.org/10.2139/ssrn.1129770