Seasonality in Regression: An Application of Smoothness Priors

Mark Gersovitz () and James MacKinnon

Working Paper from Economics Department, Queen's University

Abstract: This article argues that conventional approaches to the treatment of seasonality in econometric investigation are often inappropriate. A more appropriate technique is to allow all regression coefficients to vary with the season, but to constrain them to do so in a smooth fashion. A Bayesian method of estimating smoothly varying seasonal coefficients is developed, based on Shiller's (1973) approach to estimating distributed lags. In a sampling experiment, this technique outperforms ordinary least squares by a substantial margin. An application of this technique to the estimation of the demand for soft drinks is also presented.

Keywords: seasonality; smoothness prior; distributed lag; mixed estimation; soft drinks (search for similar items in EconPapers)
JEL-codes: C10 C11 C13 (search for similar items in EconPapers)
Pages: 20
Date: 1977
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Journal of the American Statistical Association, 73, 1978

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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:257

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