AN ESTIMATION PROCEDURE FOR ERROR VARIANCE INCORPORATING PTS FOR RANDOM EFFECTS MODEL UNDER LINEX LOSS FUNCTION

Abstract

In the present paper an estimator of the error variance for a three-way layout in random effects model incorporating two preliminary tests of significance has been proposed. It has been well recognized that estimation of parameters, of interest under asymmetric loss function (ASL) is generally better than that under squared error loss function (SELF), particularly where overestimation and underestimation are not equally penalised. As neither overestimation nor underestimation of error variance is desirable, with this motivation, the proposed estimator for the error variance has been studied under LINEX loss function. It is claimed that, with proper choice of degree of asymmetry and level of significance, proposed the sometimes pool estimator performs fairly better than unbiased estimator. Recommendations regarding its application have been attempted.