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

CREATES Research Paper 2008-9

37 Pages Posted: 25 Jun 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

Multiple version iconThere are 2 versions of this paper

Date Written: June 2, 2008

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 echniques. Stationary processes, trend stationary autoregressions and unit root processes are considered.

Keywords: Empirical processes, Huber's skip, indicator saturation, M-estimator, outlier robustness, vector autoregressive process

JEL Classification: C32

Suggested Citation

Johansen, Soren and Nielsen, Bent, An Analysis of the Indicator Saturation Estimator as a Robust Regression Estimator (June 2, 2008). CREATES Research Paper 2008-9. Available at SSRN: https://ssrn.com/abstract=1148143 or http://dx.doi.org/10.2139/ssrn.1148143

Soren Johansen (Contact Author)

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Aarhus University - CREATES ( email )

Nordre Ringgade 1
Aarhus, DK-8000
Denmark

Bent Nielsen

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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