Linear regression under model uncertainty

DOI10.3934/PUQR.2023024MaRDI QIDQ6149350zbMATH OpenOpenAlexFDO

Authors Shuzhen Yang, Jian-Feng Yao

Publication date 5 February 2024

Published in Probability, Uncertainty and Quantitative Risk (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2108.02140

zbMATH Keywords

\(G\)-normal distributiondistribution uncertaintyheteroscedastic errorrobust regressionS\&P index

Mathematics Subject Classification ID

Linear regression; mixed models (62J05)

Abstract: We reexamine the classical linear regression model when the model is subject to two types of uncertainty: (i) some of covariates are either missing or completely inaccessible, and (ii) the variance of the measurement error is undetermined and changing according to a mechanism unknown to the statistician. By following the recent theory of sublinear expectation, we propose to characterize such mean and variance uncertainty in the response variable by two specific nonlinear random variables, which encompass an infinite family of probability distributions for the response variable in the sense of (linear) classical probability theory. The approach enables a family of estimators under various loss functions for the regression parameter and the parameters related to model uncertainty. The consistency of the estimators is established under mild conditions on the data generation process. Three applications are introduced to assess the quality of the approach including a forecasting model for the S&P Index.

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