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extremum_estimators_nls

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Estimadores Extremos

MQO No-Linear (NLS)

Cristine Campos de Xavier Pinto

CEDEPLAR/UFMG

Maio/2010

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

In Nonlinear Least Squares,

E[ Y[ X] = h (X, )

where h is a known function of X and is a Px1 vector of

parameters.

We assume that we know h (., ) up to a set of parameters.

Parameter Space (): subset of R

P

.

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

Examples:

1 Exponential Regression Function: h (X, ) = exp (X), X is a

row vector with one as the rst element.

2 Logistic Regression: h (X, ) =

exp(X)

1+exp(X)

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

We need to assume that we have the correctly specied model

for the conditional mean,

E[ Y[ X] = h (X,

0

)

for some

0

.

In the nonlinear least squares, we are using an additive

unobservable error model with zero conditional mean:

Y = h (X,

0

) + , where E[ [ X] = 0

In this case, depending on the nature of Y, the error may

have some unusual properties.

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

NSL1: For some

0

R

P

, E[ Y[ X] = h (X,

0

) .

The data is a random sample of size N from the population,

Z

i

, i = 1, ..., N, Z

i

= (X

i

, Y

i

)

In this case,

0

is the value that solves the population problem

min

E

_

(Y h (X,

0

))

2

_

. .

=Q

0

()

where the expectation is taking over the joint distribution of

(X, Y) .

Using the sample analog, the NLS estimator

maximizes

Q

N

() =

1

N

N

i =1

[Y

i

h (X

i

, )]

2

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

To get identication, we need to assume that

0

is the unique

solution for the population problem.

We need to assume that h (X, ) is not the conditional mean

for ,=

0

.

NSL2: h (X, ) ,= h (X,

0

) if ,=

0

.

Example: Linear Model

h (X, ) = X

/

/

X] is nonsingular,

which implies that

X

/

,= X

/

0

for ,=

0

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

Theorem

Under assumptions NSL1 and NSL2, and h (X, ) is continuous

over

0

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

Lets try to get the asymptotic linear representation of the

NLS estimator.

For convenience, lets divide the original objective function by

2,

maximizes

Q

N

() =

1

N

N

i =1

[Y

i

h (X

i

, )]

2

2

The FOC condition of this problem is:

s

N

_

Z

i

,

_

=

1

N

N

i =1

\

h

_

X

i

,

_

/

_

Y

i

h

_

X

i

,

__

= 0

where \

h

_

X

i

.

_

is the 1xP gradient of h (X

i

.) .

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

Doing the mean value expansion

1

_

N

N

i =1

\

h

_

X

i

,

_

/

_

Y

i

h

_

X

i

,

__

=

1

_

N

N

i =1

\

h (X

i

,

0

)

/

[Y

i

h (X

i

,

0

)] +

1

N

N

i =1

_

\

2

/ h

_

X

i

,

_

/

_

Y

i

h

_

X

i

,

__

\

h

_

X

i

,

_

/

\

h

_

X

i

,

_

_

_

N

_

0

_

So we can write

_

N

_

0

_

= H

1

0

_

1

_

N

N

i =1

\

h (X

i

,

0

)

/

[Y

i

h (X

i

,

0

)]

_

+o

p

(1)

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

Note that

H

0

=

E

_

\

2

/ h (X

i

,

0

)

/

[Y

i

h (X

i

,

0

)] \

h (X

i

,

0

)

/

\

h (X

i

,

0

)

and

E

_

\

2

/ h (X

i

,

0

)

/

[Y

i

h (X

i

,

0

)] \

h (X

i

,

0

)

/

\

h (X

i

,

0

)

= \

2

/ h (X

i

,

0

)

/

E[ Y

i

h (X

i

,

0

)[ X]

\

h (X

i

,

0

)

/

\

h (X

i

,

0

)

= \

h (X

i

,

0

)

/

\

h (X

i

,

0

)

so

H

0

= E

_

\

h (X

i

,

0

)

/

\

h (X

i

,

0

)

When

0

is identied, E

_

\

h (X

i

,

0

)

/

\

h (X

i

,

0

)

is

positive semidenite

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

Lets show that the population moment analog to this

expression has the expected value equals to 0 at =

0

,

E[s (Z

i

,

0

)] = E[E[ s (Z

i

,

0

)[ X]]

E[ s (Z

i

,

0

)[ X] = E

_

\

h (X,

0

)

/

[Y h (X,

0

)]

= \

h (X,

0

)

/

[E[ Y[ X] h (X,

0

)]

= 0

so

E[s (Z

i

,

0

)] = 0

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

Note that

Var [s (Z

i

,

0

)] = E

_

s (Z

i

,

0

) s (Z

i

,

0

)

/

= E

_

(Y h (X,

0

))

2

\

h (X,

0

)

/

\

h (X,

0

)

_

= E

_

2

\

h (X,

0

)

/

\

h (X,

0

)

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

The asymptotic linear representation of

is

_

N

_

0

_

=

1

_

N

N

i =1

H

1

0

s (Z

i

,

0

) +o

p

(1)

where E[s (Z

i

,

0

)] = 0, and E

_

s (Z

i

,

0

) s (Z

i

,

0

)

/

<

Applying the CLT,

_

N

_

0

_

d

A

_

0, A

1

0

A

1

0

_

where

A

0

= E

_

\

h (X,

0

)

/

\

h (X,

0

)

= E

_

2

\

h (X,

0

)

/

\

h (X,

0

)

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

The estimator of A

0

is

A =

N

i =1

\

h

_

X

i

,

_

/

\

h

_

X

i

,

_

To estimate , we use the nonlinear least squares residuals

i

= Y

i

h

_

X

i

,

=

N

i =1

2

i

\

h

_

X

i

,

_

/

\

h

_

X

i

,

_

This is the heteroskedasticity-robust variance estimator

for NLS.

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

Suppose we assume homoskedasticity (NLS3):

Var [ [ X] =

2

In this case,

=

2

A

0

and

_

N

_

0

_

d

A

_

0,

2

A

1

0

_

and

V =

_

N

i =1

2

i

N P

_

_

N

i =1

\

h

_

X

i

,

_

/

\

h

_

X

i

,

_

_

1

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

The LM and QLR test, under homoskedasticity, for NLS

estimator are very familiar.

We want to test Q restrictions:

H

0

: c (

0

) = 0

To get the LM statistics under homoskedasticity, we need to

obtain

2

=

1

N

N

i =1

2

i

, where

i

= Y

i

m

_

X

i

,

_

and

is

the constrained estimator of

0

.

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

The LM statistics under homoskedasticity is

LM =

1

2

_

N

i =1

\

h

_

X

i

,

i

_

/

_

N

i =1

\

h

_

X

i

,

_

/

\

h

_

X

i

,

_

_

1

_

N

i =1

\

h

_

X

i

,

i

_

This repression is equal to N times the R

2

of a regression of

i

on \

h

_

X

i

,

_

.

Under NS1-NSL3, LM

d

A

2

Q

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

Recall that

QLR = 2

_

N

i =1

q

_

Z

i

,

i =1

q

_

Z

i

,

_

_

In the case that

2

,= 1, we need to divide this expression by

2

.

Under assumptions NS1-NSL3,

QLR =

SSR

r

SSRur

SSR

ur

(N P) ~ A

2

Q

To get the classical F test, we just need to divide by Q.

Cristine Campos de Xavier Pinto Institute

Estimadores Extremos

Identication and Consistency Asymptotic Normality Estimating the Asymptotic Variance Tests

References

Amemya: 4

Wooldridge, 12

Newey, W. and D. McFadden (1994). "Large Sample

Estimation and Hypothesis Testing", Handbook of

Econometrics, Volume IV, chapter 36.

Cristine Campos de Xavier Pinto Institute

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