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Worst-case estimation and asymptotic theory for models with unobservables

Jose Vidal-Sanz and Mercedes Esteban-Bravo ()

DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de Economía de la Empresa

Abstract: This paper proposes a worst-case approach for estimating econometric models containing unobservable variables. Worst-case estimators are robust against the adverse effects of unobservables. In contrast to the classical literature, there are no assumptions about the statistical nature of the unobservables in a worst-case estimation. This method is robust with respect to the unknown probability distribution of the unobservables and should be seen as a complement to standard methods, as cautious modelers should compare different estimations to determine robust models. The limit theory is obtained. A Monte Carlo study of finite sample properties has been conducted. An economic application is included.

Date: 2004-11
New Economics Papers: this item is included in nep-ecm
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Working Paper: Worst-case estimation and asymptotic theory for models with unobservables (2005) Downloads
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