Publication Type

Working Paper

Version

publishedVersion

Publication Date

8-2014

Abstract

In this paper, we consider the problem of frequentist model averaging for quantile regression (QR) when all the M models under investigation are potentially misspecified and the number of parameters in some or all models is diverging with the sample size n. To allow for the dependence between the error terms and the regressors in the QR models, we propose a jackknife model averaging (JMA) estimator which selects the weights by minimizing a leave-one-out cross-validation criterion function and demonstrate that the jackknife selected weight vector is asymptotically optimal in terms of minimizing the out-of-sample final prediction error among the given set of weight vectors. We conduct Monte Carlo simulations to demonstrate the finite-sample performance of the proposed JMA QR estimator and compare it with other model selection and averaging methods. We find that the JMA QR estimator can achieve significant efficiency gains over the other methods, especially for extreme quantiles. We apply our JMA method to forecast quantiles of excess stock returns and wages.

Keywords

Final prediction error, High dimensionality, Model averaging, Model selection, Quantile regression, Economics

Discipline

Econometrics

Research Areas

Econometrics

First Page

1

Last Page

45

Publisher

SMU Economics and Statistics Working Paper Series, No. 11-2014

City or Country

Singapore

Copyright Owner and License

Authors

Comments

Published in Journal of Econometrics https://doi.org/10.1016/j.jeconom.2014.11.005

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