### "Econometric Shrinkage and Model Averaging" (Week-after-next at the Statistics Seminar)

*Attention conservation notice*: Irrelevant unless
you are (a) interested in combining statistical models and (b) in Pittsburgh.

Week after next at the statistics seminar:

Bruce E. Hansen,
"Econometric Shrinkage and Model Averaging"
*Abstract:* Model uncertainty is pervasive in applied econometrics.
The traditional solution of model selection is being supplanted by the concept
of model averaging. When there are two nested models, model averaging is
equivalent with shrinkage estimation. In econometrics, shrinkage theory has
been confined to the linear Gaussian regression model, precluding application
to most econometric contexts. In this talk, I show that we can apply the modern
theory of statistical shrinkage to parametric econometric estimators, including
GMM and MLE. The result is that we can construct shrinkage estimators which
globally dominate conventional unrestricted GMM and MLE estimators. I extend
the classic theory by allowing for arbitrary estimators and weight matrices,
and I show how the methods can be used to separate parameters of interest from
nuisance parameters. The reduction in risk from shrinkage can be
substantial.
Model averaging generalizes shrinkage to the case where the number of
models exceeds two. Non-Bayesian model averaging methods have been developed by
the author in previous work. The talk will discuss the development of
non-Bayesian model averaging methods for general econometric estimators.
*Time and Place:* Monday, 31 August 2009, 4--5 pm, Doherty Hall 310
The seminar is free and open to the public. Contact me if you would like to meet with Prof. Hansen during his visit to CMU.

Enigmas of Chance;
The Dismal Science

Posted at August 20, 2009 14:55 | permanent link