We present a fundamentally unique method of nonparametric regression using clusters and test it against classically established methods. We compare two nonlinear regression estimation packages called ‘NNS’, Viole (NNS: nonlinear nonparametric statistics, 2016), and ‘np’, Hayfield and Racine (J Stat Softw 27(5):1–32, 2008), with the help of a simulation using deterministic (DT) and stochastic (ST) regressor models. We find the respective coefficients of determination \((R^2)\) are close for DT models, while finding an advantage to NNS in ST and large sample cases. Regression coefficients are sometimes regarded as approximations to partial derivatives, especially in social sciences. Then, NNS alone has the ability to compute a range of partials evaluated at points within the sample and also out-of-sample. Thus NNS can provide a viable alternative to kernel based nonparametric regressions without using bandwidths for smoothing.
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In R, we used the variables: >x = seq(0,4*pi,pi/1000);y = sin(x)
There is considerable literature devoted to the topic of boundaries and endpoints in ‘np’, with no consensus as to how to best handle them.
The mean of course is defined as the sum of weighted observations, weighted by 1 over the number of all observations. The single observation weighting and quadrant partitions eventually lead to the limit condition of NNS partitioning.
The variance is not directly used in NNS regression. Viole and Nawrocki (2012a) demonstrate the covariance matrix equivalence from NNS partitioning and it is mentioned here in order to further exemplify NNS partitioning’s robustness.
The use of explicit linear regressions within segments is avoided by NNS since it cannot reach such limits. This is because one needs a minimum number of observations for a sensible regression fit. Empty segments are ignored by NNS.
The R code for simulation is available on GitHub: https://github.com/OVVO-Financial/NNS/tree/Data-and-Simulation-Routines/NNS-Simulation-Routines The NNS R routines are also available on GitHub: https://github.com/OVVO-Financial/NNS/tree/NNS-Beta-Version/R
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We would like to thank the anonymous referees providing valuable commentary on earlier versions of this manuscript.
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Vinod, H.D., Viole, F. Nonparametric Regression Using Clusters. Comput Econ 52, 1317–1334 (2018). https://doi.org/10.1007/s10614-017-9713-5