Publication Type
Journal Article
Version
acceptedVersion
Publication Date
12-2007
Abstract
We correct the limit theory presented in an earlier paper by Hu and Phillips [2004a. Nonstationary discrete choice. Journal of Econometrics 120, 103-138] for nonstationary time series discrete choice models with multiple choices and thresholds. The new limit theory shows that, in contrast to the binary choice model with nonstationary regressors and a zero threshold where there are dual rates of convergence (n1/4 and n3/4), all parameters including the thresholds converge at the rate n3/4. The presence of nonzero thresholds therefore materially affects rates of convergence. Dual rates of convergence reappear when stationary variables are present in the system. Some simulation evidence is provided, showing how the magnitude of the thresholds affects finite sample performance. A new finding is that predicted probabilities and marginal effect estimates have finite sample distributions that manifest a pile-up, or increasing density, towards the limits of the domain of definition.
Keywords
Brownian motion, Brownian local time, Discrete choices, Integrated processes, Pile-up problem, Threshold parameters
Discipline
Econometrics
Research Areas
Econometrics
Publication
Journal of Econometrics
Volume
141
Issue
2
First Page
1115
Last Page
1130
ISSN
0304-4076
Identifier
10.1016/j.jeconom.2007.01.017
Publisher
Elsevier
Citation
PHILLIPS, Peter C. B.; JIN, Sainan; and HU, Ling.
Nonstationary Discrete Choice: A Corrigendum and Addendum. (2007). Journal of Econometrics. 141, (2), 1115-1130.
Available at: https://ink.library.smu.edu.sg/soe_research/285
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jeconom.2007.01.017