Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/220052
Authors: 
Luca, Giuseppe De
Magnus, Jan R.
Peracchi, Franco
Year of Publication: 
2020
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2020-015/III
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
Many statistical and econometric learning methods rely on Bayesian ideas, often applied or reinterpreted in a frequentist setting. Two leading examples are shrinkage estimators and model averaging estimators, such as weighted-average least squares (WALS). In many instances, the accuracy of these learning methods in repeated samples is assessed using the variance of the posterior distribution of the parameters of interest given the data. This may be permissible when the sample size is large because, under the conditions of the Bernstein--von Mises theorem, the posterior variance agrees asymptotically with the frequentist variance. In finite samples, however, things are less clear. In this paper we explore this issue by first considering the frequentist properties (bias and variance) of the posterior mean in the important case of the normal location model, which consists of a single observation on a univariate Gaussian distribution with unknown mean and known variance. Based on these results, we derive new estimators of the frequentist bias and variance of the WALS estimator in finite samples. We then study the finite-sample performance of the proposed estimators by a Monte Carlo experiment with design derived from a real data application about the effect of abortion on crime rates.
Subjects: 
Normal location model
posterior moments and cumulants
higher-order delta method approximations
double-shrinkage estimators
WALS
JEL: 
C11
C13
C15
C52
I21
Document Type: 
Working Paper

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