Frequentist model averaging for multinomial and ordered logit models

Multinomial and ordered Logit models are quantitative techniques which are used in a range of disciplines nowadays. When applying these techniques, practitioners usually select a single model using either information-based criteria or pretesting. In this paper, we consider the alternative strategy of combining models rather than selecting a single model. Our strategy ofweight choice for the candidatemodels is based on theminimization of a plug-in estimator of the asymptotic squared error risk of the model average estimator. Theoretical justifications of this model averaging strategy are provided, and a Monte Carlo study shows that the forecasts produced by the proposed strategy are often more accurate than those produced by other common model selection and model averaging strategies, especiallywhen the regressors are onlymildly tomoderately correlated and the truemodel contains few zero coefficients. An empirical example based on credit rating data is used to illustrate the proposed method. To reduce the computational burden, we also consider a model screening step that eliminates some of the very poor models before averaging. © 2013 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved. s. P