Some Further Results on the Use of Proxy Variables in Prediction.

In econometric analysis, occasionally some of the regressors are not available. In this paper, the authors study the implications of two strategies: either cancel these regressors from the model or use proxy variables instead. It is analyzed which of both strategies leads to an improvement in conditional prediction of the systematic part in terms of the mean square error criterion. Furthermore, some characterizations for admissibility are given. Copyright 1993 by MIT Press.