Journal
COMMUNICATIONS IN STATISTICS-THEORY AND METHODS
Volume 42, Issue 7, Pages 1246-1264Publisher
TAYLOR & FRANCIS INC
DOI: 10.1080/03610926.2012.697968
Keywords
James-Stein estimator; Random matrix theory; Random design
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We find that, in a linear model, the James-Stein estimator, which dominates the maximum-likelihood estimator in terms of its in-sample prediction error, can perform poorly compared to the maximum-likelihood estimator in out-of-sample prediction. We give a detailed analysis of this phenomenon and discuss its implications. When evaluating the predictive performance of estimators, we treat the regressor matrix in the training data as fixed, i.e., we condition on the design variables. Our findings contrast those obtained by Baranchik (1973) and, more recently, by Dicker (2012) in an unconditional performance evaluation.
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