Econometrics Videos

The Royal Economics Society (publisher of The Econometrics Journal) has recently released a video of invited addresses by Alfred Galichon and Jeremy Lise, in the special session on “Econometrics of Matching” at the 2015 RES Conference.

This video joins similar ones from previous RES conferences, these being:

• “Large Dimensional Models”, 
• ”Heterogeneity”,  
• “Econometrics of Forecasting”, 
•  “Nonparametric Identification” 

This link will take you to all of these videos.

Happy viewing!

© 2015, David E. Giles

Specification Testing in the Ordered Probit Model

Readers of this blog will know I'm a proponent of more specification testing in the context of Logit, Probit, and related models. For, instance, see this recent post, and the links within it.

I received an email from Paul Johnson, Chair of the Department of Economics at Vassar College, today. He wrote:

"I thought that, given your interest in specification tests in probit etc. models, you might find the attached paper of mine (written some years ago) to be useful as it expounds the straightforward generalization of the Bera, et al. (1984) test to the ordered probit case."

Paul's paper is, indeed, very interesting and I hadn't seen it before. It's titled, "A Test of the Normality Assumption in the Ordered Probit Model", and it appeared in the statistics journal, Metron (1996, LIV, 213-221).

Here's the abstract:

"This paper presents an easily implemented test of the assumption of a normally distributed error term for the ordered probit model, As this assumption is the central maintained hypothesis in all estimation and testing based on this model, the test ought to serve as a key specification test in applied research. A small Monte Carlo experiment suggests that the test has good size and power properties."

A year later, a closely related paper by P. Glewwe appeared in Econometric Reviews. That author doesn't mention Paul's paper, but these things happen. Glewwe's paper does take things a little further than Paul does, by allowing for censoring of the data.

© 2015, David E. Giles

Worrying About my Cholesterol Level

The headline, "Don't Get Wrong Idea About Cholesterol", caught my attention in the 3 May, 2015 Times-Colonist newspaper here in Victoria, B.C.. In fact the article came from a syndicated column, published about a week earlier. No matter - it's always a good time for me to worry about my cholesterol!

The piece was written by a certain Dr. Gifford-Jones (AKA Dr. Ken Walker).

Here's part of what he had to say:

Statistical Calculations & Numerical Accuracy

This post is for those readers who're getting involved with economic statistics for the first time. Basically, it serves as a warning that sometimes the formulae that you learn about have to be treated with care when it comes to the actual numerical implementation.

Sometimes (often) there's more than one way to express the formula for some statistic. While thee formulae may be mathematically identical, they can yield different numerical results when you go to apply them. Yes, this sounds counter-intuitive, but it's true. And it's all to do with the numerical precision that your calculator (computer) is capable of.

The example I'll give is a really simple one. However, the lesson carries over to more interesting situations. For instance, the inversion of matrices that we encounter when applying the OLS estimator is a case in point. When you fit a regression model using several different statistics/econometrics computer packages, you sometimes get slightly different results. This is because the packages can use different numerical methods to implement the algebraic results that you're familiar with.

For me, the difference between a "good" package and a "not so good" package isn't so much the range of fancy techniques that each offers at the press of a few keys. It's more to do with what's going on "under the hood". Do the people writing the code know how make that code (a) numerically accurate; and (b) numerically robust to different data scenarios?

Logit, Probit, & Heteroskedasticity

I've blogged previously about specification testing in the context of Logit and Probit models. For instance, see here and here. 

Testing for homoskedasticity in these models is especially important, for reasons that are outlined in those earlier posts. I won't repeat all of the details here, but I'll just note that heteroskedasticity renders the MLE of the parameters inconsistent. (This stands in contrast to the situation in, say, the linear regression model where the MLE of the parameters is inefficient, but still consistent in this case.)

If you're an EViews user, you can find my code for implementing a range of specification tests for Logit and Probit models here. These include the LM test for homoskedasticity that was proposed by Davidson and MacKinnon (1984).

More than once, I've been asked the following question:

"When estimating a Logit or Probit model, we set the scale parameter (variance) of the error term to the value one, because it's not actually identifiable. So, in what sense can we have heteroskedasticity in such models?"

This is a good question, and I thought that a short post would be justified. Let's take a look:

June Reading List

• Andrews, I. and T. B. Armstrong, 2015. Unbiased instrumental variables estimation under known first-stage sign. Cowles Foundation Discussion Paper No. 1984R, Yale University,
• Bajari, P., D. Nekipelov, S. P. Ryan, and M. Yang. 2015. Demand estimation with machine learning and model combination. NBER Working Paper 20955.
• Chambers, M. J., 2015. A jackknife correction to a test for cointegration rank. Econometrics, 3, 355-375.
• Mazeu, J. H. G., E. Ruiz and H. Veiga, 2015. Model uncertainty and the forecast accuracy of ARMA models: A survey. UC3M Working Paper 15-08, Statistics and Econometrics, Universidad Carlos III de Madrid. 
• Paldam, M., 2015. Meta-analysis in a nutshell: Techniques and general findings. Economics, 9, 2015-11.
• Triacca, U., 2015. A pitfall in using the characterization of Granger non-causality in vector autoregressive models. Econometrics, 3, 233-239.

© 2015, David E. Giles

The Replication Network

Some of my previous posts have dealt with the issue of replicability - e.g., here and here.

I had an email from Bob Reed today, alerting me to his involvement in the launching of The Replication Network. I knew that this was a big interest of Bob's, and it's great to see where things are going with this important venture.

Here's Bob's email:

"I would like to invite you to consider joining The Replication Network (TRN). TRN is a website/community of scholars committed to promoting the use of replications in economics.  For those of you who have seen an earlier version of the website, please note that the site has been thoroughly revamped in preparation for its “rollout” in June 2015.  I think you will like what you see.  You can check it out at :http://replicationnetwork.com/. For researchers interested in publishing replication studies, the website provides up-to-date information about (i) which journals encourage replication submissions, and (ii) a list of recently published replication studies that can serve as models of good practice.  It also lists News and Events related to replications. Membership has its privileges. :-)  Members can post their research on the website and are invited to contribute guest blogs related to replications.  Members will also receive email updates every few months alerting them to new content on the website. There is no financial cost to join TRN, you will not be bothered with advertising or other spam, and you can easily unsubscribe if you later choose to.  The main reason I encourage you to join TRN is because there is strength in numbers.  If journals can see that there is a substantial readership of academics who support replication research and are interested in seeing it promoted, they may choose to change their editorial policies to include the publishing of replication studies.  The lack of publishing outlets is the single biggest obstacle to the wider use of replication in economics. 

Thank you for giving this some thought. And feel free to forward this email to your colleagues. 

If you have any questions do not hesitate to contact me."

I hope that readers will check this out and spread the word.


© 2015, David E. Giles

John Nash, 1928 - 2015

John & Alicia Nash

Tragically, John and Alicia Nash died as the result of a road accident on New Jersey yesterday.

Just days previously, Nash was the co-recipient of the 2015 Abel Prize for his contributions to the theory of nonlinear partial differential equations. He was the only person to be awarded both the Abel Prize and a Nobel Prize (Economics, 1994).

It would be impertinent of me to try and comment meaningfully, here, on Nash's contributions to Game Theory.

I was, however, taken by one comment on Twitter this morning:

Ferdinando is referring to Nash's Ph.D. dissertation, "Non-Cooperative Games", completed at Princeton University in May of 1950. Yes, it was just 27 pages long. One of the only two references was to von Neumann and Morgenstern's classic 1944 book, Theory of Games and Economic Behavior. The other was to Nash's own paper, published in the Proceedings of the National Academy of Sciences in 1950. It spanned just two pages, but was actually less than one page long!

Yes, sometimes it really is the case that, "Less is more". (Ludwig Mies van der Rohe)

(Suggested reading: "How Long Should My Thesis Be?".)

© 2015, David E. Giles

Maximum Likelihood Estimation & Inequality Constraints

This post is prompted by a question raised by Irfan, one of this blog's readers, in some email correspondence with me a while back.

The question was to do with imposing inequality constraints on the parameter estimates when applying maximum likelihood estimation (MLE). This is something that I always discuss briefly in my graduate econometrics course, and I thought that it might be of interest to a wider audience.

Here's the issue.

A Pleasant Surprise

I could scarcely believe my good fortune when I opened the following email earlier today:

Dear Dr Giles,

Congratulations, your paper “Being ‘in’ assessment: The ontological layer(ing) of assessment practice” published in Journal of Applied Research in Higher Education has been selected by the journal’s editorial team as the Outstanding Paper of 2014. We aim to increase dissemination of such a high quality article as much as possible and aim to promote your paper by making it freely available for one year. I will confirm once the free access has gone live so that you will be able to let others know. This will be in the next couple of weeks. As a winner you will receive a certificate. Where possible, we like to organise for you to be presented with your certificate in person. We will be in touch with you shortly (next few weeks) in the hope that we can organize a presentation. Again, many congratulations on your award. We will be in touch with you regarding our plans to promote and present your award very soon. Please do not respond to this mail asking about when your chapter will be made freely available or about possible presentations. I will be in touch soon with all the details!! 

Best regards,
Jim Bowden

Academic Relations Manager | Emerald Group Publishing Limited 

Tel: +44 (0)1274 785013 | Fax: +44 (0)1274 785200

Now, I must confess that I had some difficulty recalling the details of what I'd written to deserve this unexpected honour. But it must have been pretty darned good!

So, to refresh my memory I took a quick look at the 2014 volume of the journal in question. (Bookmark this link for future free access!)

Sure enough, there I it was - not the lead article, but close enough (apparently):

For reasons that I simply can't fathom, our library doesn't subscribe to this journal. For reasons that I definitely can fathom, neither do I! The promised free access has not yet "gone live", so I'll have to spare you the pleasure of a replication of the full text of the article here.

However, by way of recompense, here's the abstract:

Abstract:

Purpose

– Current discourses on educational assessment focus on the priority of learning. While this intent is invariably played out in classroom practice, a consideration of the ontological nature of assessment practice opens understandings which show the experiential nature of “being in assessment”. The purpose of this paper is to discuss these issues.

Design/methodology/approach

– Using interpretive and hermeneutic analyses within a phenomenological inquiry, experiential accounts of the nature of assessment are worked for their emergent and ontological themes.

Findings

– These stories show the ontological nature of assessment as a matter of being in assessment in an embodied and holistic way.

Originality/value

– Importantly, the nature of a teacher's way-of-being matters to assessment practices. Implications exist for teacher educators and teacher education programmes in relation to the priority of experiential stories for understanding assessment practice, the need for re-balancing a concern for professional knowledge and practice with a students’ way of being in assessment, and the pedagogical implications of evoking sensitivities in assessment.

I can hardly believe I wrote that!

(I have replied to Mr. Bowden, expressing my gratitude but suggesting that a certain David Giles in the School of Education at Flinders University in Australia may be even more pleased to hear from him than I was.)

© 2015, David E. Giles