Fractional Probit with Cross-Sectional Volatility: Bridging Heteroskedastic Probit and Fractional Response Models

Songsak Sriboonchitta, Aree Wiboonpongse (), Jittaporn Sriboonjit and Woraphon Yamaka ()
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Songsak Sriboonchitta: Center of Excellence in Econometric, Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand
Aree Wiboonpongse: Faculty of Agriculture, Chiang Mai University, Chiang Mai 50200, Thailand
Jittaporn Sriboonjit: Faculty of Commerce and Accountancy, Thammasat University, Bangkok 10200, Thailand
Woraphon Yamaka: Center of Excellence in Econometric, Faculty of Economics, Chiang Mai University, Chiang Mai 50200, Thailand

Econometrics, 2025, vol. 13, issue 4, 1-10

Abstract: This paper introduces a new econometric framework for modeling fractional outcomes bounded between zero and one. We propose the Fractional Probit with Cross-Sectional Volatility (FPCV), which specifies the conditional mean through a probit link and allows the conditional variance to depend on observable heterogeneity. The model extends heteroskedastic probit methods to fractional responses and unifies them with existing approaches for proportions. Monte Carlo simulations demonstrate that the FPCV estimator achieves lower bias, more reliable inference, and superior predictive accuracy compared with standard alternatives. The framework is particularly suited to empirical settings where fractional outcomes display systematic variability across units, such as participation rates, market shares, health indices, financial ratios, and vote shares. By modeling both mean and variance, FPCV provides interpretable measures of volatility and offers a robust tool for empirical analysis and policy evaluation.

Keywords: fractional response models; heteroskedastic; probit; cross-sectional volatility; limited dependent variables; variance modeling (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2025
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