Bootstrapping the shrinkage least absolute deviations estimator

Abstract

Kim and White [13] studied a James-Stein type estimator that shrinks towards a datadependent point rather than a fixed point. This was subsequently extended and applied to combining the OLS and 2SLS estimators by [12, 14]. This approach can be used to combine any two estimators in an optimal way. While the risk dominance properties of the new shrinkage estimator have been well established, a clear prescription for how to conduct inference and hypothesis testing has been missing. In this paper, we close this gap using a bootstrap approach. 2000 Mathematics Subject Classifications: 62