Estimating the Tobit Model with Serial Correlation: an Operational Approach
Series/Report no.Cahier de recherche #8615
Several Authors Have Discussed Recently the Limited Dependent Variable Regression Model with Serial Correlation Between Residuals. the Pseudo-Maximum Likelihood Estimators Obtained by Ignoring Serial Correlation Altogether, Have Been Shown to Be Consistent. We Present Alternative Pseudo-Maximum Likelihood Estimators Which Are Obtained by Ignoring Serial Correlation Only Selectively. Monte Carlo Experiments on a Model with First Order Serial Correlation Suggest That Our Alternative Estimators Have Substantially Lower Mean-Squared Errors in Medium Size and Small Samples, Especially When the Serial Correlation Coefficient Is High. the Same Experiments Also Suggest That the True Level of the Confidence Intervals Established with Our Estimators by Assuming Asymptotic Normality, Is Somewhat Lower Than the Intended Level. Although the Paper Focuses on Models with Only First Order Serial Correlation, the Generalization of the Proposed Approach to Serial Correlation of Higher Order Is Also Discussed Briefly.
Dagenais, M.G., «Estimating the Tobit Model with Serial Correlation: an Operational Approach», Cahier de recherche #8615, Département de sciences économiques, Université de Montréal, 1986, 24 pages.