Estimation with Pairwise Observations

Felix Chan and Laszlo Matyas ()

Papers from arXiv.org

Abstract: The paper introduces a new estimation method for the standard linear regression model. The procedure is not driven by the optimisation of any objective function rather, it is a simple weighted average of slopes from observation pairs. The paper shows that such estimator is consistent for carefully selected weights. Other properties, such as asymptotic distributions, have also been derived to facilitate valid statistical inference. Unlike traditional methods, such as Least Squares and Maximum Likelihood, among others, the estimated residual of this estimator is not by construction orthogonal to the explanatory variables of the model. This property allows a wide range of practical applications, such as the testing of endogeneity, i.e., the correlation between the explanatory variables and the disturbance terms.

Date: 2024-01, Revised 2024-02
New Economics Papers: this item is included in nep-ecm and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2401.11229

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