Higher-order Improvements of the Parametric Bootstrap for Markov Processes

Donald W. K. Andrews ()

No 1334, Cowles Foundation Discussion Papers from Cowles Foundation, Yale University

Abstract: This paper provides bounds on the errors in coverage probabilities of maximum likelihood-based, percentile-t, parametric bootstrap confidence intervals for Markov time series processes. These bounds show that the parametric bootstrap for Markov time series provides higher-order improvements (over confidence intervals based on first order asymptotics) that are comparable to those obtained by the parametric and nonparametric bootstrap for iid data and are better than those obtained by the block bootstrap for time series. Additional results are given for Wald-based confidence regions. The paper also shows that k-step parametric bootstrap confidence intervals achieve the same higher-order improvements as the standard parametric bootstrap for Markov processes. The k-step bootstrap confidence intervals are computationally attractive. They circumvent the need to compute a nonlinear optimization for each simulated bootstrap sample. The latter is necessary to implement the standard parametric bootstrap when the maximum likelihood estimator solves a nonlinear optimization problem.

Keywords: Asymptotics; Edgeworth expansion; Gauss-Newton; k-step bootstrap; maximum likelihood estimator; Newton-Raphson; parametric bootstrap; t statistic (search for similar items in EconPapers)
JEL-codes: C12 C13 C15 (search for similar items in EconPapers)
Date: Written
View citations in EconPapers

Published in D.W.K. Andrews and J.H. Stock, eds., Identification and Inference for Econometric Models: A Festschrift in Honor of Thomas J. Rothenberg, Cambridge University Press, 2005, pp. 171-215

Downloads: (external link)
http://cowles.econ.yale.edu/P/cd/d13a/d1334.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cwl:cwldpp:1334

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation, Yale University
Address: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Contact information at EDIRC.
Series data maintained by Glena Ames ().