Empirical best prediction under a nested error model with log transformation
type: Item
instance of: scholarly article
published in: The Annals of Statistics
volume: 46
issue: 5
publication date: 2018-10-01T00:00:00Z
publication date: 2018-10-24T00:00:00Z
author: Isabel Molina
author: Nirian Martín
author: N. Martín
title: Empirical best prediction under a nested error model with log transformation
zbMATH Open document ID: 1406.62015
full work available at URL: https://arxiv.org/abs/1404.5465
full work available at URL: https://projecteuclid.org/euclid.aos/1534492825
review text: A finite population of size \(N\) is divided into \(D\) small domains (areas). Let \(W_{di}\) be the value of the study variate for a unit \(i\) within the area. Consider the problem of predicting the area mean \(\sum^{N_d}_{i=1}W_{di}/N_d\), where \(N_d\) is the size of the small area, or predicting the specific value \(W_{di}\) for an out-of-sample unit \(i\) within the small area. This is studied by assuming a nested error regression model with \(\log W_{di}\) as the dependent variable, since for many economic variables log transformation results in normality and variance stabilization. However, the predictors obtained by transforming back the individual predicted values may be biased. In this paper, the authors derive optimum predictors under the model assumed. The best predictors depend on the vectors of regression parameter \(\beta\) and variance components \(\Theta\) of the model which are estimated in two stages and thus Empirical Best (EB) predictors are obtained. Next, the exact Mean Squared Errors (MSE) of the best predictors and second-order approximations to the MSE as well as their estimates are derived. A simulation experiment is carried out to compare the efficiencies of the estimators studied. Furthermore, the results are illustrated by predicting the incomes of individuals and of average income in smaller domains of municipalities from Mexico. In an appendix the mathematical lemmas needed and their proofs are given. A reference to supplementary material relating to further details and additional results is mentioned at the end of the paper.
reviewed by: T. J. Rao
Mathematics Subject Classification ID: 62D05
Mathematics Subject Classification ID: 62F40
Mathematics Subject Classification ID: 62M20
Mathematics Subject Classification ID: 62P20
zbMATH DE Number: 6964322
zbMATH Keywords: empirical best estimator
zbMATH Keywords: mean squared error
zbMATH Keywords: parametric bootstrap
zbMATH Keywords: best prediction
zbMATH Keywords: nested error
zbMATH Keywords: regression model
describes a project that uses: sae
MaRDI profile type: MaRDI publication profile
arXiv ID: 1404.5465
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OpenAlex ID: W2886809461
Wikidata QID: Q129368772
DOI: 10.1214/17-AOS1608
description: scientific article