Interpretation and semiparametric efficiency in quantile regression under misspecification

Allowing for misspecification in the linear conditional quantile function, this paper provides a new interpretation and the semiparametric efficiency bound for the quantile regression parameter β ( τ ) in Koenker and Bassett (1978). The first result on interpretation shows that under a mean-squared loss function, the probability limit of the Koenker–Bassett estimator minimizes a weighted distribution approximation error, defined as F Y (X ′ β(τ)|X)−τ , i.e., the deviation of the conditional distribution function, evaluated at the linear quantile approximation, from the quantile level. The second result implies that the Koenker–Bassett estimator semiparametrically efficiently estimates the quantile regression parameter that produces parsimonious descriptive statistics for the conditional distribution. Therefore, quantile regression shares the attractive features of ordinary least squares: interpretability and semiparametric efficiency under misspecification.