Wednesday, October 10, 2012

How Good is Your Random Number Generator?

Simulation methods, including Monte Carlo simulation and various forms of the bootstrap, are widely used by econometricians. We use these tools to learn about the sampling distributions of our estimators and tests, especially in situations where a purely analytic approach is technically difficult.

For example, sometimes we're able to appeal to standard asymptotic (large sample) results - such as the central limit theorems, and the laws of large numbers - to figure out how good our inferences will be if the sample size is very large. However, when it comes to the question of how good they are when the sample size is quite small, the answer may not be so easily established.

In addition, when we come up with a new theoretical result in econometrics, most of us take the precaution of also simulating the result - as check on its accuracy.

Monte Carlo and bootstrap methods rely critically on our ability to generate "pseudo"-random numbers that have the characteristics that we ascribe to them. How often have you actually checked  if the random number generators in your favourite econometrics package produce values that are "random", and follow the distribution that you've asked for? Probably not often enough!

I follow John Cook's blog, The Endeavour. A couple of years ago he had a nice post titled, "How to test a random number generator". In that post, he links to a chapter of the same title that he wrote for the book, Beautiful Testing (edited by Tim Riley and Adam Goucher).

John's chapter is a short, but very valuable read, and I recommend it strongly.

© 2012, David E. Giles

Top 100 Economics Blogs

I was happy to learn this morning that the Economics Degree website has just released a list of Top Economics Sites for Enlightened Economists. There are 100 blogs in total, and the preamble notes:

"Listed in no specific order, these sites are a must-see for anyone who wants to be considered a quality, “enlightened” economist. Sites were selected based on a variety of factors including readership size, update frequency, information quality, and other awards received. "
I was even more pleased to see that this blog made the list (see number 71 & remember they're in particular order!), with the following, very kind, description:
"This is a high-quality blog with a strong econometrics focus. The posts are jam-packed with information and ideas, and are clearly intended for readers with a background in statistics or econometrics."
(Blush. Blush.)

There are some great sites for students and professionals alike on this Top 100 list.

Nice job!

© 2012, David E. Giles