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A One Covariate at a Time, Multiple Testing Approach to Variable Selection in High-Dimensional Linear Regression Models

Research output: Contribution to journalArticlepeer-review

Alexander Chudik, George Kapetanios, M. Hashem Pesaran

Original languageEnglish
Pages (from-to)1479-1512
JournalEconometrica
Volume86
Issue number4
Early online date2 Aug 2018
DOIs
Accepted/In press15 Mar 2018
E-pub ahead of print2 Aug 2018
Published2018

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King's Authors

Abstract

This paper provides an alternative approach to penalized regression for model selection in the context of high‐dimensional linear regressions where the number of covariates is large, often much larger than the number of available observations. We consider the statistical significance of individual covariates one at a time, while taking full account of the multiple testing nature of the inferential problem involved. We refer to the proposed method as One Covariate at a Time Multiple Testing (OCMT) procedure, and use ideas from the multiple testing literature to control the probability of selecting the approximating model, the false positive rate, and the false discovery rate. OCMT is easy to interpret, relates to classical statistical analysis, is valid under general assumptions, is faster to compute, and performs well in small samples. The usefulness of OCMT is also illustrated by an empirical application to forecasting U.S. output growth and inflation.

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