Application of M-Estimators to Cross-Section Effect Models

ABSTRACT

Statistical models with cross-section effects have been used frequently in econometrics, where there are differences in behavior over cross-section units. However, the sensitivity of the model can be disturbed due to the appearance of outlier events. A robust M-estimation is applied to this cross-section model, a small simulation study has also been carried out to provide a relative efficiency of robust M-estimates relative to the GLS estimates, and a numerical example has been presented.

Keywords:

• Cross-section effect
• Robust estimation

Acknowledgments

I would like to thank the unknown referee for his valuable comments and my colleague George Iliopoulos who made me feel that programming simulation is a “simple thing”.