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Tests for the variance parameter in the Fay–Herriot model

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Marhuenda García, Yolanda and Morales, D. and Pardo Llorente, María del Carmen (2016) Tests for the variance parameter in the Fay–Herriot model. Statistics, 50 (1). pp. 27-42. ISSN 0233-1888

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Official URL: http://www.tandfonline.com/doi/abs/10.1080/02331888.2015.1016026


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Abstract

The Fay-Herriot model is a linear mixed model that plays a relevant role in small area estimation (SAE). Under the SAE set-up, tools for selecting an adequate model are required. Applied statisticians are often interested on deciding if it is worthwhile to use a mixed effect model instead of a simpler fixed-effect model. This problem is not standard because under the null hypothesis the random effect variance is on the boundary of the parameter space. The likelihood ratio test and the residual likelihood ratio test are proposed and their finite sample distributions are derived. Finally, we analyse their behaviour under simulated scenarios and we also apply them to real data


Item Type:Article
Uncontrolled Keywords:Fay-Herriot model; small area estimation; zero variance component; likelihood ratio test; Monte Carlo simulation
Subjects:Sciences > Mathematics > Mathematical statistics
ID Code:35018
Deposited On:18 Jan 2016 13:27
Last Modified:17 Oct 2016 10:54

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