The Optimal Size of a Preliminary Test for Linear Restrictions when Estimating the Regression Scale Parameter

Judith A. Giles and Offer Lieberman

No 263003, Department of Economics Discussion Papers from University of Canterbury - New Zealand

Abstract: This paper considers the choice of critical value for a pre-test of exact linear restrictions when estimating the regression error variance. We calculate the critical value according to a mini-max risk regret criterion and compare the resulting risk functions with those generated by using the critical value which minimises the pre-test risk function. The results suggest that the latter approach is generally preferable.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 15
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Persistent link: https://EconPapers.repec.org/RePEc:ags:canzdp:263003

DOI: 10.22004/ag.econ.263003

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