The Devil is in the Detail: Hints for Practical Optimisation

T. M. Christensen, A. S. Hurn, K. A. Lindsay

    Research output: Contribution to journalArticlepeer-review

    Abstract

    Finding the minimum of an objective function, such as a least squares or negative log-likelihood function, with respect to the unknown model parameters is a problem often encountered in econometrics. Consequently, students of econometrics and applied econometricians are usually well-grounded in the broad differences between the numerical procedures employed to solve these problems. Often, however, relatively little time is given to understanding the practical subtleties of implementing these schemes when faced with ill-behaved problems. This paper addresses some of the details involved in practical optimisation, such as dealing with constraints on the parameters, specifying starting values, termination criteria and analytical gradients, and illustrates some of the general ideas with several instructive examples.

    Original languageEnglish (US)
    Pages (from-to)345-368
    Number of pages24
    JournalEconomic Analysis and Policy
    Volume38
    Issue number2
    DOIs
    StatePublished - 2008

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Economics, Econometrics and Finance (miscellaneous)

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