Berndt–Hall–Hall–Hausman algorithm

The Berndt–Hall–Hall–Hausman (BHHH) algorithm is a numerical optimization algorithm similar to the Gauss–Newton algorithm. It is named after the four originators: Ernst R. Berndt, B. Hall, Robert Hall, and Jerry Hausman.^[1]

Usage

If a nonlinear model is fitted to the data one often needs to estimate coefficients through optimization. A number of optimisation algorithms have the following general structure. Suppose that the function to be optimized is Q(β). Then the algorithms are iterative, defining a sequence of approximations, β_k given by

\beta _{k+1}=\beta _{k}-\lambda _{k}A_{k}{\frac {\partial Q}{\partial \beta }}(\beta _{k}),

,

where $\beta _{k}$ is the parameter estimate at step k, and $\lambda _{k}$ is a parameter (called step size) which partly determines the particular algorithm. For the BHHH algorithm λ_k is determined by calculations within a given iterative step, involving a line-search until a point β_k+1 is found satisfying certain criteria. In addition, for the BHHH algorithm, Q has the form

Q=\sum _{i=1}^{N}Q_{i}

and A is calculated using

A_{k}=\left[\sum _{i=1}^{N}{\frac {\partial \ln Q_{i}}{\partial \beta }}(\beta _{k}){\frac {\partial \ln Q_{i}}{\partial \beta }}(\beta _{k})'\right]^{-1}.

In other cases, e.g. Newton–Raphson, $A_{k}$ can have other forms. The BHHH algorithm has the advantage that, if certain conditions apply, convergence of the iterative procedure is guaranteed.

References

↑ Berndt, E.; Hall, B.; Hall, R.; Hausman, J. (1974). "Estimation and Inference in Nonlinear Structural Models" (PDF). Annals of Economic and Social Measurement. 3 (4): 653–665.

Gill, P.; Murray, W.; Wright, M. (1981). Practical Optimization. London: Harcourt Brace.
Harvey, A. C. (1990). The Econometric Analysis of Time Series (Second ed.). Cambridge: MIT Press. pp. 137–138. ISBN 0-262-08189-X.
Luenberger, D. (1972). Introduction to Linear and Nonlinear Programming. Reading, Massachusetts: Addison Wesley.
Sokolov, S. N.; Silin, I. N. (1962). "Determination of the coordinates of the minima of functionals by the linearization method". Joint Institute for Nuclear Research preprint D-810, Dubna.

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[1] Berndt, E.; Hall, B.; Hall, R.; Hausman, J. (1974). "Estimation and Inference in Nonlinear Structural Models" (PDF). Annals of Economic and Social Measurement. 3 (4): 653–665.

Berndt–Hall–Hall–Hausman algorithm

Usage

See also

References

Further reading