Misspecified Heteroskedasticity in the Panel Probit Model : a Small Sample Comparison of GMM and SML Estimators

Inkmann, Joachim

Misspecified Heteroskedasticity in the Panel Probit Model : a Small Sample Comparison of GMM and SML Estimators

Files

315_1.pdf(161.17 KB)

Date

1999

Authors

Inkmann, Joachim

Series

CoFE-Diskussionspapiere / Zentrum für Finanzen und Ökonometrie; 1999/04

Publication type

Working Paper/Technical Report

Abstract

This paper compares generalized method of moments (GMM) and simulated maximum likeli-hood (SML) approaches to the estimation of the panel probit model. Both techniques circum-vent multiple integration of joint density functions without the need to restrict the error term variance-covariance matrix of the latent normal regression model. Particular attention is paid to a three-stage GMM estimator based on nonparametric estimation of the optimal instru-ments for given conditional moment functions. Monte Carlo experiments are carried out which focus on the small sample consequences of misspecification of the error term variance-covariance matrix. The correctly specified experiment reveals the asymptotic efficiency ad-vantages of SML. The GMM estimators outperform SML in the presence of misspecification in terms of multiplicative heteroskedasticity. This holds in particular for the three-stage GMM estimator. Allowing for heteroskedasticity over time increases the robustness with respect to misspecification in terms of multiplicative heteroskedasticity. An application to the product innovation activities of German manufacturing firms is presented.

Subject (DDC)

330 Economics

Keywords

panel probit model,heteroskedasticity,conditional moment restrictions,optimal instruments,k-nearest neighbor estimation,GHK simulator

Cite This

ISO 690

INKMANN, Joachim, 1999. Misspecified Heteroskedasticity in the Panel Probit Model : a Small Sample Comparison of GMM and SML Estimators

BibTex

@techreport{Inkmann1999Missp-11931,
  year={1999},
  series={CoFE-Diskussionspapiere / Zentrum für Finanzen und Ökonometrie},
  title={Misspecified Heteroskedasticity in the Panel Probit Model : a Small Sample Comparison of GMM and SML Estimators},
  number={1999/04},
  author={Inkmann, Joachim}
}

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