Generalized Method of Trimmed Moments

CentER Discussion Paper Series No. 2009-25

42 Pages Posted: 15 Apr 2009

See all articles by Pavel Cizek

Pavel Cizek

Tilburg University - Department of Econometrics & Operations Research

Date Written: April 3, 2009

Abstract

High breakdown-point regression estimators protect against large errors and data contamination. We adapt and generalize the concept of trimming used by many of these robust estimators so that it can be employed in the context of the generalized method of moments. The proposed generalized method of trimmed moments (GMTM) offers a globally robust estimation approach (contrary to existing only locally robust estimators) applicable in econometric models identified and estimated using moment conditions. We derive the consistency and asymptotic distribution of GMTM in a general setting, propose a robust test of overidentifying conditions, and demonstrate the application of GMTM in the instrumental variable regression. We also compare the finite-sample performance of GMTM and existing estimators by means of Monte Carlo simulation.

Keywords: asymptotic normality, generalized method of moments, instrumental variables regression, robust estimation, trimming

JEL Classification: C13, C20, C30, C12

Suggested Citation

Cizek, Pavel, Generalized Method of Trimmed Moments (April 3, 2009). CentER Discussion Paper Series No. 2009-25, Available at SSRN: https://ssrn.com/abstract=1382807 or http://dx.doi.org/10.2139/ssrn.1382807

Pavel Cizek (Contact Author)

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands

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