Data Mining Reconsidered: Encompassing And The General-To Specific Approach To Specification Search  

Oleh:

Hoover, Kevin D. ; Perez, Stephen J.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Econometrics Journal vol. 2 no. 2 (1999), page 192-201.
Topik: General-to-specific; Encompassing; Data mining; LSE econometrics.
Fulltext: 167.pdf (608.55KB)

Isi artikel

This paper examines the efficacy of the general-to-specific modeling approach associated with the LSE school of econometrics using a simulation framework. A mechanical algorithm is developed which mimics some aspects of the search procedures used by LSE practitioners. The algorithm is tested using 1000 replications of each of nine regression models and a data set patterned after Lovell’s (1983) study of data mining. The algorithm is assessed for its ability to recover the data-generating process. Monte Carlo estimates of the size and power of exclusion tests based on t-statistics for individual variables in the specification are also provided. The roles of alternative sizes for specification tests in the algorithm, the consequences of different signal-to-noise ratios, and strategies for reducing overparameterization are also investigated. The results are largely favorable to the general-tospecific approach. In particular, the size of exclusion tests remains close to the nominal size used in the algorithm despite extensive search.

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