Three-Toed Sloth

"Econometric Shrinkage and Model Averaging" (Week-after-next at the Statistics Seminar)

Attention conservation notice: Irrelevant unless you are (a) interested in combining statistical models and (b) in Pittsburgh.

Week after next at the statistics seminar:

Bruce E. Hansen, "Econometric Shrinkage and Model Averaging"

Abstract: Model uncertainty is pervasive in applied econometrics. The traditional solution of model selection is being supplanted by the concept of model averaging. When there are two nested models, model averaging is equivalent with shrinkage estimation. In econometrics, shrinkage theory has been confined to the linear Gaussian regression model, precluding application to most econometric contexts. In this talk, I show that we can apply the modern theory of statistical shrinkage to parametric econometric estimators, including GMM and MLE. The result is that we can construct shrinkage estimators which globally dominate conventional unrestricted GMM and MLE estimators. I extend the classic theory by allowing for arbitrary estimators and weight matrices, and I show how the methods can be used to separate parameters of interest from nuisance parameters. The reduction in risk from shrinkage can be substantial.

Model averaging generalizes shrinkage to the case where the number of models exceeds two. Non-Bayesian model averaging methods have been developed by the author in previous work. The talk will discuss the development of non-Bayesian model averaging methods for general econometric estimators.

Time and Place: Monday, 31 August 2009, 4--5 pm, Doherty Hall 310

The seminar is free and open to the public. Contact me if you would like to meet with Prof. Hansen during his visit to CMU.

Enigmas of Chance; The Dismal Science