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The exact risk performance of a pre-test estimator in a heteroskedastic linear regression model under the balanced loss function

Kazuhiro Ohtani, David Giles () and Judith Giles
Authors registered in the RePEc Author Service: Judith Anne Clarke ()

Econometric Reviews, 1997, vol. 16, issue 1, 119-130

Abstract: We examine the risk of a pre-test estimator for regression coefficients after a pre-test for homoskedasticity under the Balanced Loss Function (BLF). We show analytically that the two stage Aitken estimator is dominated by the pre-test estimator with the critical value of unity, even if the BLF is used. We also show numerically that both the two stage Aitken estimator and the pre-test estimator can be dominated by the ordinary least squares estimator when “goodness of fit” is regarded as more important than precision of estimation.

Keywords: balanced loss; heteroskedasticity; sequential estimator; goodness of fit (search for similar items in EconPapers)
Date: 1997
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DOI: 10.1080/07474939708800376

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