Monte Carlo vs Sampling Error in Construction of Iterated Bootstrap Condence Intervals

Stephen M.S. Lee Department of Statistics and Actuarial Science, The University of Hong Kong, Hong Kong

1. Introduction Let X = X ; : : : ; Xn be a random sample and be a scalar parameter. A conventional 1 1

level two-sided bootstrap interval I for typically has coverage error of order On, . A general application of the iterated bootstrap involves i embedding I in a broad class of bootstrap ^ 2 I t ^ to satisfy P ^ j X = , where I t is intervals I t calibrated by t, ii choosing t the version of I t computed on a bootstrap resample drawn from X , and iii dening the ^. 3 shows that the coverage error of J is reduced iterated bootstrap interval to be J = I t , to On . In practice, Monte Carlo approximation to J requires the drawing of B rst-level ^ and the probability in step ii, and the drawing of C second-level resamples to approximate I t bootstrap resamples from each rst-level resample to calculate I t. The intrinsic sampling error of the iterated bootstrap is thus overlaid with a certain Monte Carlo error induced by nite simulation. This article focuses on three dierent algorithms for approximating J , studies the interplay of sampling and Monte Carlo errors, and makes recommendation on choices of B and C for the algorithms. We assume, as in 1, validity of Edgeworth expansions in order to establish asymptotic expansions for the coverage probabilities.
2

2. Three Monte Carlo algorithms

^ Let m and k be the rst- and second-level bootstrap resample sizes respectively. Let ^b be the version of ^ calculated from the be a consistent estimate of calculated from X , and ^ ^ B the sorted sequence of the ^b 's, bth rst-level bootstrap resample. Denote by and by h i the integer part function. In our setup, the conventional iterated bootstrap percentile method interval takes m = ^` ,t ; ^` t , where `t = h 1+ tB +1i: see 1. Note that the k = n and denes I t to be ^b 's is used to approximate the theoretical bootstrap percentile and sample percentile of the that the iterated bootstrap calibrates the coverage level t to yield an iterated interval J . 2 proposes an interpolation approach to make the above Monte Carlo construction more ecient. ^,t; ^t , where ^t = f1 , B; tg ^` t + It sets m = k = n and denes I t to be ^` t and B; = 1 + B + 1=2 , h 1 + B + 1=2 i. Interpolation between B; t ^b 's gives a smoother approximation to the theoretical bootstrap percentile. the percentiles The iterated bootstrap again calibrates the coverage level t, resulting in an interval J . The m-out-of-n bootstrap approach, proposed by 4, sets m n, k = m =n and denes I t = ^t; ,; ^t; , where ^t; = t, logf 1 , m=n = expt ^ + m=n = expt ^` g. ^b is scaled by t and transformed exponentially, making the skewness of the The percentile bootstrap distribution freely adjustable. The iterated bootstrap calibrates t to yield an interval J . It is computationally more ecient due to the smaller bootstrap resample sizes required.
1 1 2 1 +1 2 2 1 1 2 1 2 3

3. Monte Carlo error

We detail below the asymptotic expansions for the Monte Carlo contribution to the coverage error of the intervals J1 , J2 and J3, established respectively by 5, 2 and 4. Recall that lim !1 J corresponds to the theoretical iterated bootstrap interval. Then we have P 2 J = P 2 lim J+ !1 8 ,1 C + OB ,3 4 + C ,2 + C ,1n,1 ; i = 1; ,2 + OB ,3 4 + C ,3 + C ,1 n,1 ; C i = 2; 1 : 2 C; m=n C ,1 + OB ,3 4 + B ,1 2 n,1 + C ,2 + C ,1n,1 ; i = 3; for some function . It is worth noting that interpolation reduces the eect of C from OC ,1 to OC ,2. The same is achieved for J3 by choosing C such that C; = 0.
B;C i i B;C i = = = =

4. Recommended simulation size

We see from 1 that in order to maintain an On,2 coverage error enjoyed by the theoretical iterated bootstrap interval, B should be of order n8 3 for all three algorithms and C should be of order n2 for J1 and n for J2 and J3 provided the latter chooses C such that C; = 0. The key message is that if we x a large B , the order of the theoretical sampling error can be maintained by choosing C much smaller than traditionally advocated. On the other hand, 1 may be used strategically to trade o Monte Carlo error against the sampling error. This can be done in general by xing a large B and choosing C adaptively to eliminate the sampling error. For example, in the case of J1, we may choose C = ,=P 2 lim !1 J1 , to reduce the coverage error further to on,2: see 5 for details. The same approach can be applied to J2 and J3 with appropriate choices of C .
= B;C

5. Simulation results
In a simulation study we chose to be the variance of jN 0; 1j and set = 0:9. The coverages of J1 with B = 1000 and dierent choices of C are given below, together with results for the bootstrap interval without iteration. The adaptive choice of C was based on 5.
Interval n = 20 average C n = 35 average C Without iteration 0.686 | 0.753 | Iterated C = 500 0.814 | 0.835 | Iterated C = 100 0.825 | 0.846 | Iterated adaptive C 0.809 36.4 0.846 51.2

We see that a smaller C yields more accurate coverage and the adaptive choice of C performs very satisfactorily.

References
1 Hall, P. 1992. The Bootstrap and Edgeworth Expansion . Springer: New York. 2 Hall, P., Lee, S.M.S. & Young, G.A. 1998. Importance of interpolation when constructing double-bootstrap condence intervals. Research Report No. 204, Department of Statistics and Actuarial Science, The University of Hong Kong. 3 Hall, P. & Martin, M.A. 1988. On bootstrap resampling and iteration. Biometrika, 75, 661671. 4 Lee, S.M.S. 1998. On a class of m-out-of-n condence intervals. J. Roy. Statist. Soc. Series B . To appear. 5 Lee, S.M.S. & Young, G.A. 1999. The eect of Monte Carlo approximation on coverage error of doublebootstrap condence intervals. J. Roy. Statist. Soc. Series B , 61, 353366.