The Properties of Automatic Gets Modelling

Abstract

After reviewing the simulation performance of general-to-specific automatic regression model selection, as embodied in PcGets, we show how model selection can be non-distortionary: approximately unbiased selection estimates are derived, with reported standard errors close to the sampling standard deviations of the estimated DGP parameters, and a near-unbiased goodness-of-fit measure. The handling of theory-based restrictions, non-stationarity, and problems posed by collinear data are considered. Finally, we consider how PcGets can handle three intractable problems: more variables than observations in regression analysis; perfectly collinear regressors; and modelling simultaneous equations without a priori restrictions.

Keywords: Econometric methodology, model selection, general-to-specific, automatic