Work

Fractional Probit with Cross-Sectional Volatility: Bridging Heteroskedastic Probit and Fractional Response Models

Year: 2025

Type: article

Abstract: This paper introduces a new econometric framework for modeling fractional outcomes bounded between zero and one. We propose the Fractional Probit with Cross-Sectional Volatility (FPCV), which specifies the conditional mean through a probit link and allows the conditional variance to depend on observable heterogeneity. The model extends heteroskedastic probit methods to fractional responses and unifies them with existing approaches for proportions. Monte Carlo simulations demonstrate that the FPCV estimator achieves lower bias, more reliable inference, and superior predictive accuracy compared with standard alternatives. The framework is particularly suited to empirical settings where fractional outcomes display systematic variability across units, such as participation rates, market shares, health indices, financial ratios, and vote shares. By modeling both mean and variance, FPCV provides interpretable measures of volatility and offers a robust tool for empirical analysis and policy evaluation.

Source: Econometrics

DOI: 10.3390/econometrics13040043

Authors: Songsak Sriboonchitta, Aree Wiboonpongse, Jittaporn Sriboonjit, Woraphon Yamaka

Institutions: Chiang Mai University, Thammasat University

Language: English

Topic: Statistical Methods and Bayesian Inference

Subfield: Statistics and Probability

Field: Mathematics

Domain: Physical Sciences

Open Access status: gold

Estimated APC paid: $1,689

Funders: Chiang Mai University, Thammasat University, Faculty of Economics, Chiang Mai University