Discussion Papers, Department of Finance and Management Science, Norwegian School of Economics (NHH)
No 2009/10:
A simple improvement of the IV estimator for the classical errors-in-variables problem
Jonas Andersson ()
and Jarle Møen ()
Abstract: Two measures of an error-ridden explanatory variable make
it possible to solve the classical errors-in-variable problem by using one
measure as an instrument for the other. It is well known that a second IV
estimate can be obtained by reversing the roles of the two measures. We
explore a simple estimator that is the linear combination of these two
estimates, that minimizes the asymptotic mean squared error. In a Monte
Carlo study we show that the gain in precision is significant compared to
using only one of the original IV estimates. The proposed estimator also
compares well with full information maximum likelihood under normality.
Keywords: Measurement errors; Classical Errors-in-Variables; multiple indicator method; Instrumental variable techniques; (follow links to similar papers)
JEL-Codes: C13; C30; C80; (follow links to similar papers)
18 pages, September 15, 2009
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
DWSDownload.aspx?File=%2fFiles%2fFiler%2finstitutter%2ffor%2fdp%2f2009%2f1009.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Stein Fossen ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
