1. The EM algorithm for variance component estimation in multivariate Fay-Herriot model.
- Author
-
Angkunsit, Annop and Suntornchost, Jiraphan
- Subjects
- *
MAXIMUM likelihood statistics , *EXPECTATION-maximization algorithms , *MONTE Carlo method , *INCOME - Abstract
AbstractThe multivariate Fay-Herriot model has been shown to be useful in various applications when there are multiple response variables. Therefore, several studies of the model have been pursued specially the study of estimation techniques of the variance components. The two benchmark methods for the variance component estimation are the profile maximum likelihood method and the residual maximum likelihood method. However, it has been shown in literature that these methods can produce zero estimates of the variance components. This leads to unfavorable results since the direct estimates do not contribute to the EBLUPs. In this paper, we propose alternative estimation methods based on the EM algorithm for the variance components of the multivariate Fay-Herriot model. In our study, we illustrate the procedures of the EM algorithms for the profile likelihood and the residual likelihood. Moreover, we perform a Monte Carlo simulation to investigate the performances of the proposed methods comparing with some existing methods. The simulation results suggest that the EM algorithm improves those existing methods in certain cases particularly for the cases of small number of areas which are commonly found in applications. Finally, we apply the proposed estimates to the average household income and average household expenditure in Thailand. [ABSTRACT FROM AUTHOR]
- Published
- 2024
- Full Text
- View/download PDF