Sub-sample Model Selection Procedures in Gets Modelling

David Hendry and Hans-Martin Krolzig

No 2003-W17, Economics Papers from Economics Group, Nuffield College, University of Oxford

Abstract: When the DGP is nested in the model, PcGets delivers high performance selection across different (unknown) states of nature. One of its steps involves sub-sample post-selection assessment, and here we consider its properties and investigate its practical application. The simulation results show that conditional on retaining a variable, sub-sample information cannot discriminate between substantive and adventitious significance. The Monte Carlo experiments also reveal that the sub-sample selection method suggested by Hoover and Perez (1999) is dominated by procedures selecting only on full-sample evidence, when both approaches are evaluated at a given size. Nevertheless, although the sub-sample procedures do not result in a genuinely beneficial trade-off between size and power, they are particularly successful in controlling the size for selection problems that were previously seemed almost intractable.

Pages: 17 pages
Date: 2003-04-16
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (2)

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