A comparative study of the performances of some estimators of linear model with fixed and stochastic regressors

  • K Ayinde
  • JO Iyaniwura
Keywords: Fixed Regressors, Stochastic Regressors, Linear Model, Autocorrelated error, OLS estimator, Feasible GLS estimators

Abstract



In linear regression model, regressors are assumed fixed in repeated sampling. This assumption is not always satisfied especially in business, economics and social sciences. Consequently in this paper, effort is made to compare the performances of some estimators of linear model with autocorrelated error terms when normally distributed regressors are fixed (non – stochastic) with when they are stochastic. The estimators are the ordinary least square (OLS) estimator and four feasible generalized least estimators which are Cochrane Orcutt (CORC), Hidreth – Lu (HILU), Maximum Likelihood (ML), Maximum Likelihood Grid (MLGD) estimator. These estimators are compared using the finite properties of estimators' criteria namely; sum of biases, sum of variances and sum of the mean squared error of the estimated parameter of the model at different levels of autocorrelation and sample size through Monte – Carlo studies. Results show that at each level of autocorrelation the estimated value of the criteria with stochastic regressor are much lesser than that of the fixed regressor for all the estimators except CORC when the sample size is small (n=20) and the level of autocorrelation is very high . More comparatively, it is observed that the same estimator(s) that is more efficient with fixed regressors is also more efficient with stochastic regressors except when the sample size is large (n = 80) and the level of autocorrelation is either low or high . At these instances, the CORC / HILU estimator is more efficient with fixed regressors while the ML / MLGD estimator is more efficient with stochastic regressors

Keywords: Fixed Regressors, Stochastic Regressors, Linear Model, Autocorrelated error, OLS estimator, Feasible GLS estimators

Global Journal of Pure and Applied Sciences Vol. 14 (3) 2008: pp. 363-370
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Articles

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eISSN: 1118-0579