Chapter

Bias Correcting Selection Effects

David F. Hendry

in Empirical Model Discovery and Theory Evaluation

Published by The MIT Press

Published in print August 2014 | ISBN: 9780262028356
Published online January 2015 | e-ISBN: 9780262324410 | DOI: https://dx.doi.org/10.7551/mitpress/9780262028356.003.0010
Bias Correcting Selection Effects

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We develop approximate bias corrections for the conditional distributions of the estimated parameters of retained variables after model selection, such that approximately unbiased estimates of their coefficients are delivered. Such corrections also drive estimated coefficients of irrelevant variables towards the origin, substantially reducing their mean squared errors (MSEs). We illustrate the theory by simulating selection from N = 1000 variables, to examine the impacts of our approach on estimated coefficient MSEs for both relevant and irrelevant variables in their conditional and unconditional distributions.

Keywords: Selection bias corrections; conditional distributions; mean squared errors

Chapter.  1772 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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