Arbeitspapier

Obtaining reliable Likelihood Ratio tests from simulated likelihood functions

It is standard practice by researchers and the default option in many statistical programs to base test statistics for mixed models on simulations using asymmetric draws (e.g. Halton draws). This paper shows that when the estimated likelihood functions depend on standard deviations of mixed parameters this practice is very likely to cause misleading test results for the number of draws usually used today. The paper shows that increasing the number of draws is a very inefficient solution strategy requiring very large numbers of draws to ensure against misleading test statistics. The paper shows that using one dimensionally antithetic draws does not solve the problem but that the problem can be solved completely by using fully antithetic draws. The paper also shows that even when fully antithetic draws are used, models testing away mixing dimensions must replicate the relevant dimensions of the quasi-random draws in the simulation of the restricted likelihood. Again this is not standard in research or statistical programs. The paper therefore recommends using fully antithetic draws replicating the relevant dimensions of the quasi-random draws in the simulation of the restricted likelihood and that this should become the default option in statistical programs.

Language
Englisch

Bibliographic citation
Series: IFRO Working Paper ; No. 2013/1

Classification
Wirtschaft
Statistical Simulation Methods: General
Single Equation Models; Single Variables: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
Subject
Quasi-Monte Carlo integration
Antithetic draws
Likelihood Ratio tests
simulated likelihood
panel Mixed MultiNomial Logit
Halton draws

Event
Geistige Schöpfung
(who)
Andersen, Laura Mørch
Event
Veröffentlichung
(who)
University of Copenhagen, Department of Food and Resource Economics (IFRO)
(where)
Copenhagen
(when)
2013

Handle
Last update
10.03.2025, 11:41 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Andersen, Laura Mørch
  • University of Copenhagen, Department of Food and Resource Economics (IFRO)

Time of origin

  • 2013

Other Objects (12)