Robustness or Efficiency, A Test to Solve the Dilemma
Catherine Dehon (),
Marjorie Gassner and
Econometrics from University Library of Munich, Germany
When dealing with the presence of outliers in a dataset, the problem of choosing between the classical ordinary least squares and robust regression methods is sometimes addressed inadequately. In this article, we propose using a Hausman-type test to determine whether a robust S- estimator is more appropriate than an ordinary least squares one in a multiple linear regression framework, on the basis of the trade-off betewen robustness and efficiency. An economic example is provided to illustrate the usefulness of the test.
Keywords: Efficiency; Hausman Test; Linear Regression; Robustness; S- estimator (search for similar items in EconPapers)
JEL-codes: C12 C13 (search for similar items in EconPapers)
Pages: 30 pages
New Economics Papers: this item is included in nep-ecm
Note: Type of Document - pdf; pages: 30
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:0508011
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