The Korean Economic Review
Square Density Weighted Average Derivatives Estimation of Single Index Models
Myung Jae Sung (Hongik University)Year 2014Vol. 30No. 2
This paper proposes an average derivatives estimator for index coefficients under a singleindex model, which does not require restrictive conditions such as zero boundary density ordensity trimming that are often adopted in previous studies including Powell, Stock, andStoker (1989, PSSE) and Härdle and Stoker (1989, HSE), among others. Coefficients areconsistently estimable by nonparametric mean regression with square density weightedaverage derivatives (SWADE). Relaxed requirements for SWADE allow more generalapplications. The asymptotic distribution of SWADE is equivalent in precision to theaforementioned average derivatives estimators (PSSE and HSE). Monte Carlo simulationsshow that SWADE outperforms HSE in finite sample but is slightly and weakly outweighedby PSSE. These imply that SWADE allows more flexible applications with relaxeddistributional characteristics than PSSE and HSE at the expense of slightly deterioratedbehavior in finite sample.