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Testing a single regression coefficient in high dimensional linear models

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  • Lan, Wei
  • Zhong, Ping-Shou
  • Li, Runze
  • Wang, Hansheng
  • Tsai, Chih-Ling

Abstract

In linear regression models with high dimensional data, the classical z-test (or t-test) for testing the significance of each single regression coefficient is no longer applicable. This is mainly because the number of covariates exceeds the sample size. In this paper, we propose a simple and novel alternative by introducing the Correlated Predictors Screening (CPS) method to control for predictors that are highly correlated with the target covariate. Accordingly, the classical ordinary least squares approach can be employed to estimate the regression coefficient associated with the target covariate. In addition, we demonstrate that the resulting estimator is consistent and asymptotically normal even if the random errors are heteroscedastic. This enables us to apply the z-test to assess the significance of each covariate. Based on the p-value obtained from testing the significance of each covariate, we further conduct multiple hypothesis testing by controlling the false discovery rate at the nominal level. Then, we show that the multiple hypothesis testing achieves consistent model selection. Simulation studies and empirical examples are presented to illustrate the finite sample performance and the usefulness of the proposed method, respectively.

Suggested Citation

  • Lan, Wei & Zhong, Ping-Shou & Li, Runze & Wang, Hansheng & Tsai, Chih-Ling, 2016. "Testing a single regression coefficient in high dimensional linear models," Journal of Econometrics, Elsevier, vol. 195(1), pages 154-168.
  • Handle: RePEc:eee:econom:v:195:y:2016:i:1:p:154-168
    DOI: 10.1016/j.jeconom.2016.05.016
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    1. Zhou, He & Zou, Hui, 2024. "The nonparametric Box–Cox model for high-dimensional regression analysis," Journal of Econometrics, Elsevier, vol. 239(2).

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