Should We Demean the Data?

Yong Bao

Annals of Economics and Finance, 2015, vol. 16, issue 1, 163-171

Abstract: The sample average is an unbiased estimator of the population mean, so it may seem innocuous that for estimating model parameters that do not involve the population mean, the data can be demeaned first. Using a first-order moving average (MA) model for example, we derive the analytical approximate biases of the quasi maximum likelihood estimators (QMLEs) based on the original and demeaned data. The bias results indicate that the QMLEs can behave quite differently in finite samples and it is not always advisable to demean the data if the MA parameter is of primary interest to estimate.

Keywords: Demean; Moving Average; Bias (search for similar items in EconPapers)
JEL-codes: C22 C51 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2015:v:16:i:1:bao

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