Global Polynomial Kernel Hazard Estimation

Jens Perch Nielsen () and Carsten Tanggaard ()
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Jens Perch Nielsen: Codan, Postal: Gammel Kongevej 60, 1790 København V, Denmark
Carsten Tanggaard: Department of Finance, Aarhus School of Business, Postal: Fuglesangs Allé 4, 8210 Aarhus V, Denmark, http://www.asb.dk/staff/afl/cat.aspx?page=%7B061AA9FC-A669-44F4-B298-E9759FA21305%7D

No 00-16, Finance Working Papers from University of Aarhus, Aarhus School of Business, Department of Business Studies

Abstract: This paper introduces a new bias reducing method for kernel hazard estimation. The method is called global polynomial adjustment (GPA). It is a global correction which is applicable to any kernel hazard estimator. The estimator works well from a theoretical point of view as it symptotically reduces bias with unchanged variance. A simulation study investigates the finite-sample properties of GPA. The method is tested on local constant and local linear estimators both with and without multiplicative bias correction and with the additive bias correction proposed in Nielsen and Tanggaard (2000). From the simulation experiment we conclude that the global estimator improves the goodness-of-fit. An especially encouraging result is that the bias-correction works well for small samples, where traditional bias reduction methods have a tendency to fail.

Keywords: Counting process theory; Kernel estimation; Hazard functions; Local linear estimation; boundary kernels. (search for similar items in EconPapers)
Pages: 11 pages
Date: 2000-09-29
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