University of Surrey

Test tubes in the lab Research in the ATI Dance Research

Adjusted QMLE for the Spatial Autoregressive Parameter

Martellosio, Federico and Hillier, Grant (2019) Adjusted QMLE for the Spatial Autoregressive Parameter Journal of Econometrics.

[img] Text
adj_lik_3.pdf - Accepted version Manuscript
Restricted to Repository staff only

Download (520kB)
[img] Text (Supplementary Material)
adj_lik_Supplement_3.pdf - Accepted version Manuscript
Restricted to Repository staff only

Download (365kB)

Abstract

One simple, and often very effective, way to attenuate the impact of nuisance parameters on maximum likelihood estimation of a parameter of interest is to recenter the profile score for that parameter. We apply this general principle to the quasi-maximum likelihood estimator (QMLE) of the autoregressive parameter λ in a spatial autoregression. The resulting estimator for λ has better finite sample properties compared to the QMLE for λ, especially in the presence of a large number of covariates. It can also solve the incidental parameterproblem that arises, for example, in social interaction models with network fixed effects, or infspatial panel models with individual or time fixed effects. However, spatial autoregressions present specific challenges for this type of adjustment, because recentering the profile score may cause the adjusted estimate to be outside the usual parameter space for λ. Conditions for this to happen are given, and implications are discussed. For inference, we propose confidence intervals based on a Lugannani{Rice approximation to the distribution of the adjusted QMLE of λ. Based on our simulations, the coverage properties of these intervals are excellent even in models with a large number of covariates.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
NameEmailORCID
Martellosio, Federicof.martellosio@surrey.ac.uk
Hillier, Grant
Date : 2019
Copyright Disclaimer : © 2019. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords : adjusted maximum likelihood estimation, fixed effects, group interaction, networks, spatial autoregression. JEL Classification: C12, C21.
Related URLs :
Depositing User : Charlene King
Date Deposited : 27 Mar 2019 10:29
Last Modified : 04 Sep 2019 14:28
URI: http://epubs.surrey.ac.uk/id/eprint/850882

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year


Information about this web site

© The University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom.
+44 (0)1483 300800