On the inefficiency of the restricted maximum likelihood

Nicholas Longford

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: The restricted maximum likelihood is preferred by many to the full maximum likelihood for estimation with variance component and other random coefficient models, because the variance estimator is unbiased. It is shown that this unbiasedness is accompanied in some balanced designs by an inflation of the mean squared error. An estimator of the cluster-level variance that is uniformly more efficient than the full maximum likelihood is derived. Estimators of the variance ratio are also studied.

Keywords: efficiency; random effects; truncation; variance component. (search for similar items in EconPapers)
Date: 2014-03
New Economics Papers: this item is included in nep-ecm and nep-ger
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